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Bayer’s Announcement Offer Acted as a Commitment Device

The combination of the existence of a schedule and the lack of

confidentiality agreement helped Bayer reduce it to credibly commit to a single strategy of

total payouts by allowing

payment.

In

this

respect

it acted Bayer to As Spier

like a paying (2003)

most-favored nation agreement.

It effectively committed

a single

price for any

given

formally

demonstrated,

it is

injury to all plaintiffs. often in a defendant’s

interest to commit to commitment mechanism,

a particular settlement amount.

But absent some

even

plaintiffs

who

would

otherwise

accept

a

lower

early offer will delay, correctly anticipating that it will be rational for the defendant to make a higher second offer rather than risk trial. A simple extended form game theory diagram, as shown in Figure 1, can

illustrate this:

26

____________

26 This simple model assumes that the defendant and the plaintiff possess complete information about the relevant payouts except for the

payoffs of trial. possesses perfect plaintiffs.

The model does not assume that the defendant information about the distribution of the type

of

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