Why do poor cases find their way to trial?

Given the costs involved, litigation seems to be a particularly inefficient outcome of pretrial bargaining. Existing models are based upon the assumption that the plaintiff is less informed than the defendant about the strength of her case. They counterfactually predict that only strong cases find their way to court, where the plaintiff's success rate should be very high. In a recent TILEC discussion paper, TILEC member Jun Zhou shows that litigation can be the outcome of rational behavior by a litigant and her attorney. Indeed, if the attorney has more information than his client about the characteristics of the suit, then the client is led to use litigation as a way of extracting information. Counterintuitively, litigation occurs only when the plaintiff is pessimistic about her prospects at trial, for that is the way for her to make sure that the attorney will not represent the case as weak and spend many more billable hours on bargaining. The plaintiff is more likely to sue if litigation is riskier and less likely to do so if she receives third-party litigation financing. The paper was awarded a 2008 Young Economist Award by the European Economic Association.