The Economics of Appeals

Abstract

This paper examines the incentive to appeal. While existing literature focuses on appeals as a mechanism for correcting errors or controlling judicial incentives, we explore individual litigants’ incentives in civil and criminal cases by modeling the opportunity cost of the trial court judgment for litigants when deciding whether to appeal. In civil trials, this causes a reluctance to appeal for plaintiffs and a bias in favor of appealing for defendants. The same effect induces a bias toward appeal for defendants convicted in criminal trials. We also model the factors that determine appeals and posttrial settlements. Our model illustrates the importance of litigants’ beliefs about their prospects on appeal in driving appeals: If parties are sufficiently pessimistic, appellate courts will play little role in correcting errors or controlling judicial incentives. We also examine the empirical literature on appeals and compare the model’s implications to the claims therein.