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The Reduced Form of Litigation Models and the Plaintiff's Win Rate

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Abstract

This paper introduces the reduced-form approach to litigation selection models. A reduced form comprises a joint distribution of parties’ beliefs about the probability that a plaintiff would win in the event a dispute were litigated; a conditional win rate function giving the actual probability of a plaintiff’s win in the event of litigation, given the parties’ subjective beliefs; and a litigation rule that provides the probability that a dispute will be litigated given the two parties’ beliefs. Models with very different-looking structures can be understood in common reduced-form terms. The reduced form can be used to prove interesting and perhaps surprising results related to the plaintiff’s win rate in litigated cases.

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