caa a22 4500 378936352 CHVBK 20180305123641.0 cr unu---uuuuu 161128e20040521xx s 000 0 eng 10.2202/1538-0645.1202 doi (NATIONALLICENCE)gruyter-10.2202/1538-0645.1202 Wickelgren Abraham L. 1Bureau of Economics, Federal Trade Commission, awickelgren@law.utexas.edu A Model of Welfare-Reducing Settlement [Elektronische Daten] [Abraham L. Wickelgren] While it is typically taken for granted that settlement of lawsuits increases social welfare, this paper shows that settlement can lower welfare. If the defendant has private information about the harm from his action both at the time of the action and the time of settlement bargaining, then defendants who cause different levels of harm can pay the same settlement amount in a partial pooling equilibrium. Settlement acts as a damage cap, preventing the defendant's liability from increasing with the harm over the full range of possible harms, leading to under-deterrence. This result holds even though the social planner can choose the socially optimal damage rule. ©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston K10, K41 nationallicence Settlement nationallicence Litigation nationallicence Contributions in Economic Analysis & Policy De Gruyter 3/1(2004-05-21) 3:1 2004 3 bejeap https://doi.org/10.2202/1538-0645.1202 text/html Onlinezugriff via DOI 1 research article jats NATIONALLICENCE 856 40 https://doi.org/10.2202/1538-0645.1202 text/html Onlinezugriff via DOI NATIONALLICENCE 100 1- Wickelgren Abraham L. 1Bureau of Economics, Federal Trade Commission, awickelgren@law.utexas.edu NATIONALLICENCE 773 0- Contributions in Economic Analysis & Policy De Gruyter 3/1(2004-05-21) 3:1 2004 3 bejeap CC0 http://creativecommons.org/publicdomain/zero/1.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-gruyter