Settlement of Litigation under Rule 68: An Economic Analysis

Rule 68 of the U.S. Federal Rules of Civil Procedure provides that a plaintiff who refuses a defendant's formal settlement offer and then obtains a judgment not more favorable than the offer must pay the defendant's postoffer costs. An economic analysis is provided (i) to argue that the standard definition of settlement range is not adequate for analyzing Rule 68 because it contains unreasonable, dominated offers, (ii) to present a new definition of the refined settlement range that is adequate for analyzing the effects of Rule 68, and (iii) to propose a revision of Rule 68 to encourage settlements of litigation.