Bargaining in the Shadow of the Website: Disclosure's Impact on Litigation Behavior

This study investigates the significance of secrecy and disclosure for medical malpractice litigation. Starting in the mid-1990s, seventeen states began posting information on a doctor’s specific history of medical malpractice claims on state-run websites. The laws creating these sites altered the level of secrecy that would accompany litigation and settlement. Taking into account the varying disclosure requirements across the states, we estimate the impact of the altered levels of secrecy on litigant behavior. We find that website disclosure reduces settlement amounts for doctors with multiple payments. We also find evidence supporting two, non-exclusive explanations for the decline. The first is that defendants value secrecy and are no longer willing to pay a secrecy premium after website disclosure. The second is that website disclosure changes the composition of cases, skewing it toward more low-quality claims. The authors wish to thank Jennifer Arlen, Andrew Daughety, John Donohue, Jennifer Reinganum, Seth Seabury, the anonymous referee and participants at the UCLA-Rand Institute Transparency in Civil Litigation conference. the 2008 American Law and Economics Association meeting, and the 2008 Conference of Empirical Legal Studies for their helpful comments, and June Kim, Linda O’Connor, Joshua Bobrowsky, James Field, Adam Gibbs, and the Hugh and Hazel Darling Law Library, for their invaluable research assistance. 1