Spite and retaliation in pretrial bargaining

Why do disputes go to trial when parties agree about expected judgments? We model bargaining with private information about motives: plaintiffs may be spiteful, defendants may retaliate against spite. In the separating equilibrium, trials occur when spiteful plaintiffs meet retaliatory defendants, so observed trials are endogenously selected toward high-conflict pairings. In pooling equilibria, settlement is certain. Both types of equilibria can coexist for intermediate parameter values, suggesting small institutional changes can discontinuously affect trial rates. • Private information about motives (spite, retaliation) distorts pretrial bargaining. • Separating equilibrium: high demand signals spite; trials only with retaliators. • Pooling equilibria: common demand acceptable to retaliators; settlement is certain. • Trials are endogenously selected toward high-conflict plaintiff-defendant pairs.