  Economic theory has provided an estimable intuition in understanding the
perplexing ideologies in law, in the areas of economic law, tort law, contract
law, procedural law and many others. Most legal systems require the parties
involved in a legal dispute to exchange information through a process called
discovery. The purpose is to reduce the relative optimisms developed by
asymmetric information between the parties. Like a head or tail phenomenon in
stochastic processes, uncertainty in the adjudication affects the decisions of
the parties in a legal negotiation. This paper therefore applies the principles
of aleatory analysis to determine how negotiations fail in the legal process,
introduce the axiological concept of optimal transaction cost and formulates a
numerical methodology based on backwards induction and stochastic options
pricing economics in estimating the reasonable and fair bargain in order to
induce settlements thereby increasing efficiency and reducing social costs.
