Abstract
We investigate the consequences of introducing a settlement stage to the environment of Deffains and Fluet (2013) in which an injurer has moral concern about harming a victim. Focusing on the unique interior solution, we characterize the Perfect Bayesian Equilibrium that has a cutoff property: high-moral types are willing to settle whereas low-moral types reject the victim's settlement offer and proceed to trial. We show that the injurer's equilibrium level of precautionary effort increases as the injureri¯s moral type increases and becomes constant at the marginal moral-type who is indifferent between settlement and trial. We also discuss the settlement's effect in reducing the high types' precautionary effort and the cost shifting rule's effect on the equilibrium outcomes
Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
