The Timing of Out-of-Court Settlements

Parties to a lawsuit will frequently delay litigation, even in circumstances where a voluntary agreement is eventually reached. This article is concerned with what causes legal disputes to be prolonged over time. We discuss dynamic models of litigation to illustrate how changes in the bargaining environment might generate empirical hazard functions. Comparative statics results are then corroborated with empirical estimates of a hazard function adjusted to account for both the heterogeneity of lawsuits and the nonproportional time dependence suggested by theory.