Pricing behavior, effort choices, and settlement offers under alternative legal cost allocation systems: Evidence from an auditing game

摘要: Abstract This paper reports the results of two experiments, each consisting six sessions, designed to investigate seller behavior in an auditing game. Across we vary legal cost allocation rule. In experiment one, must pay his or her costs regardless outcome litigation (the American rule). two, (and buyer's costs), but only if is liable for damages suffered British Within experiment, whether seller's (effort choices, fee offers, and settlement offers) consistent with game theory behavioral theory. differences arise behavior, which may be attributable system. Our findings, general, provide little support theory, directional predictions. Effort choices one are such predictions, otherwise found. By comparison, across experiments The direct appears focal determining fees. find that offers include a higher premium, above competitive price, under rule than addition, more likely optimal