Winners and Losers in the Settlement of Merger Litigation
One of the most common conclusions in the law and economics literature is that most litigation ends in settlement (Priest and Klein (1984, 2)). Given full information and symmetric stakes, disputes result in settlements, as parties avoid the transactions costs associated with the legal system. In general, a settlement is a compromise that occurs when the defendant’s maximum acceptable offer is greater than the plaintiff’s minimum acceptable demand. The actual terms depend on the bargaining position of the litigants (including the facts of the dispute and the stakes of the parties) and the exogenous legal structure. In certain cases, differences in expectations and incentives preclude settlement and lead to litigation.
KeywordsTransaction Cost Court Decision Federal Trade Commission Horizontal Merger Market Definition
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