A THEORETICAL MODEL IS DEVELOPED THAT IDENTIFIES THE VARIABLES RELEVANT TO THE CHOICE BETWEEN A SETTLEMENT AND A TRIAL. THE BASIC ASSUMPTION OF THE MODEL IS THAT BOTH THE PROSECUTOR AND THE DEFENDANT MAXIMIZE THEIR UTILITY, APPROPRIATELY DEFINED, SUBJECT TO A CONSTRAINT ON THEIR RESOURCES. IT IS SHOWN THAT THE DECISION TO SETTLE OR GO TO TRIAL DEPENDS ON THE PROBABILITY OF CONVICTION BY TRIAL, THE SEVERITY OF THE CRIME, THE AVAILABILITY AND PRODUCTIVITY OF THE PROSECUTOR'S AND DEFENDANT'S RESOURCES, TRIAL VERSUS SETTLEMENT COSTS, AND ATTITUDES TOWARD RISK. THE EFFECTS OF THE BAIL SYSTEM AND COURT DELAY ON SETTLEMENTS ARE ANALYZED, AND SEVERAL PROPOSALS FOR IMPROVING THE BAIL SYSTEM AND REDUCING COURT DELAY ARE CONSIDERED. THE MODEL IS ALSO USED TO EXAMINE THE FREQUENT CHARGE THAT THE CRIMINAL JUSTICE SYSTEM DISCRIMINATES AGAINST LOW INCOME DEFENDANTS. THE SECOND PART OF THE STUDY IS AN EMPIRICAL ANALYSIS FROM PUBLISHED DATA ON THE DISPOSITION OF CASES IN STATE AND FEDERAL CRIMINAL COURTS. A THEORETICAL AND EMPIRICAL ANALYSIS ON THE DEMAND FOR CIVIL CASES IS PRESENTED IN THE APPENDIX....RCB