This paper studies in a model à la Bebchuk how the existence of anasymmetric information on the risk aversion of parties engaged in a trialaffects the way they litigate. We first consider the situation where theplaintiff is the informed party, and solve for the equilibrium with andwithout pre-trial negotiations. Then, we analyze the comparative static ofthe model and the effects of alternative fee-shfting rules. Finally, wediscuss several extensions: the case where the defendant is the informedparty, the influence of the representation of litigants’ preferences, and ofthe existence of the optimistic bias (or self-serving bias).
