Better settle than sorry: The regret aversion theory of litigation behavior

Legal scholars have developed two dominant theories of litigation behavior: the Economic Theory of Suit and Settlement, which is based on expected uti lity theory, ansi the Framing Theory of Litigation, which is based on prosp ect theory. While Professor Guthrie acknowledges the explanatory power of t hese theories, he argues that they are flawed because they portray litigant s solely as calculating creatures. These theories disregard any role emotio n might play in litigation decision making. Guthrie proposes a complementary theory-the Regret Aversion Theory of Litig ation Behavior-that views litigants as both calculating and emotional creat ures. With roots in economics, cognitive psychology, and social psychology, the Regret Aversion Theory predicts that individuals will seek to make dec isions that minimize the likelihood they will experience postdecision regre t. Because regret is most likely to arise when individuals discover that th ey would have obtained better outcomes if they had decided differently, the Regret Aversion Theory predicts that people will make decisions that shiel d them from this knowledge. Using an experimental survey methodology, Guthrie tests this theory in the litigation context and finds that litigants, when choosing between settleme nt and trial, systematically prefer settlement because it minimizes the lik elihood that they will experience regret. Settling reduces regret by allowi ng litigants to avoid discovering that trial might have been the better dec ision; trial offers no such protection. Guthrie concludes by examining the implications of the Regret Aversion Theory for lawyers and for the legal sy stem as a whole.