Spite in litigation

Abstract This paper studies how litigation and settlement behaviour is affected by agents motivated by spiteful preferences under the American fee‐shifting rule compared to the English one. We conduct an experiment and find that litigation expenditures are overall higher under the English rule compared to the American rule—even for low‐merit cases—while there is no difference for settlement requests. Spiteful participants exhibit overall higher expenditures and settlement requests, with a more pronounced increase in litigation expenditures under the American fee‐shifting rule and a similar increase in settlement requests under both rules. Being spiteful comes at a cost. The expected payoff is lower for more spiteful litigants—especially under the American rule—independent of facing a less or more spiteful opponent. Additionally, being matched with a more spiteful litigant reduces the expected payoff similarly under both rules. We conclude that the English rule can protect spiteful players from themselves but cannot reduce the harm they inflict upon others—at the cost of inducing higher litigation expenditures for less spiteful players compared to the American rule.