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Law, Psychology, and MoralityThe Role of Loss Aversion$
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Eyal Zamir

Print publication date: 2014

Print ISBN-13: 9780199972050

Published to Oxford Scholarship Online: November 2014

DOI: 10.1093/acprof:oso/9780199972050.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 28 July 2021

Litigation and Settlement

Litigation and Settlement

4 Litigation and Settlement
Law, Psychology, and Morality

Eyal Zamir

Oxford University Press

This chapter discusses several characteristics of litigants’ behavior related to loss aversion. First, the tendency of plaintiffs to frame the outcomes of civil litigation as potential gains, and defendants’ inclination to frame them as potential losses, explain why defendants are less inclined than plaintiffs to accept settlement proposals. More important, while loss aversion explains why litigants sometimes fail to settle cases, the combination of anticipated regret and loss aversion provides a powerful explanation as to why the great majority of cases do settle. Another phenomenon that may be related to loss aversion is the limited recourse to alternative-dispute-resolution mechanisms. Finally, the chapter discusses the role of loss aversion in plea bargains.

Keywords:   alternative dispute resolution, civil litigation, default effect, plea bargaining, regret, risk aversion, risk seeking, settlement

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