Decision rules in a judicial hierarchy

This paper extends the analysis of the structure of judicial hierarchies to environments in which litigants may have asymmetric information about the merits of the case. We identify equilibria in which the error rate is zero. In each equilibrium, at least one of the inferior courts does not decide cases on the basis of its prior beliefs. Rather, in the absence of an informative signal, an inferior court decides against the informed litigant in order to exploit that litigant's knowledge. The optimal decisional rule with potentially uninformed litigants thus differs from that when, after trial, both litigants are fully informed. (JEL: D 79, H 10, K 41)