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Kathryn E. Spier, The Dynamics of Pretrial Negotiation, 59 Rev. Econ. Stud. 93 (1992).

Abstract: A model of sequential bargaining with one-sided incomplete information is analyzed where, if an agreement is not reached, the agents go to court. A “deadline effect” emerges where much settlement occurs just prior to the trial, and many cases proceed to court. If fixed costs are incurred during each bargaining period, a “U-shaped” pattern of settlement emerges. These patterns persist in the limit as the time between offers approaches zero. A model with an endogenous trial date is also considered, and it is shown that even with complete information, there exist inefficient equilibria where disputes are resolved in court.