Private antitrust litigation often involves a dominant firm being accused of exclusionary conduct by a smaller rival. In such cases, the defendant generally has a much larger financial stake in the outcome. We explore the implications of this asymmetry in a model of litigation with endogenous effort. Asymmetric stakes lead antitrust defendants to invest systematically more resources into litigation, causing a downward bias in the plaintiff’s success probability---a distortion that carries over to ex-ante settlements. Enhanced damages cannot prevent this systematic bias. We show that, in most private litigation contexts, asymmetric stakes do not create any distortion, because the prospect of ex-post (post-judgment) settlement makes the litigants behave as if the stakes are symmetric. But this does not occur in antitrust, because it proscribes certain ex-post settlements. We consider how courts might mitigate the distortion by altering the plaintiff’s evidentiary burden.
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