The Use of Most-Favored-Nation Clauses in Settlement of Litigation

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The Use of Most-Favored-Nation Clauses in Settlement of Litigation

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Title: The Use of Most-Favored-Nation Clauses in Settlement of Litigation
Author: Spier, Kathryn E.
Citation: Kathryn E. Spier, The Use of Most-Favored-Nation Clauses in Settlement of Litigation, 34(1) RAND J. Econ. 78 (2003).
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Abstract: Many settlement contracts in litigation involving multiple plaintiffs (or multiple defendants) in- clude “most-favored-nation” (MFN) clauses. If an early settlement includes an MFN and the defendant settles later with another plaintiff for more money, the early settlers receive these terms too. If the defendant knows the aggregate distribution of expected awards but cannot discriminate among the privately informed plaintiffs, then MFNs avoid costly delay. Plaintiffs with weak cases settle early rather than on the courthouse steps. The effects of MFNs on the settlement terms, plaintiffs’ welfare, litigation rates, and the defendant’s ex ante incentives are considered and alternative explanations are explored.
Published Version: http://www.jstor.org/stable/3087444
Other Sources: http://www.law.harvard.edu/faculty/spier/pdf/mfnrand.pdf
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:10611779
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