How can a prosecutor, who has only limited resources, credibly threaten so many defendants with costly and risky trials and extract plea bargains involving harsh sentences? Had defendants refused to settle, many of them would not have been charged or would have escaped with lenient sanctions. But such collective stonewalling requires coordination among defendants, which is difficult if not impossible to attain. Moreover, the prosecutor, by strategically timing and targeting her plea offers, can create conflicts of interest among defendants, frustrating any attempt at coordination. The substantial bargaining power of the resource-constrained prosecutor is therefore the product of the collective action problem that plagues defendants. This conclusion suggests that, despite the common view to the contrary, the institution of plea bargains may not improve the well-being of defendants. Absent the plea bargain option, many defendants would not have been charged in the first place. Thus, we can no longer count on the fact that plea bargains are entered voluntarily to argue that they are desirable for all parties involved.

This paper argues that enforcement of an agreement, reached under a threat to refrain from dealing, should be conditioned solely on the credibility of the threat. When a credible threat exists, enforcement of the agreement promotes both social welfare and the interests of the threatened party. If agreements backed by credible threats were not enforceable, the threatening party would not bother to extract them, and would simply refrain from dealing - to the detriment of the threatened party. The doctrine of duress, which predominantly controls such agreements, only hurts the "coerced" party. By denying enforcement in cases where a credible threat exists, duress doctrine precludes the threatened party from making the commitment that is necessary to reach agreement and reduces incentives to invest. The analysis in this paper suggests that, in dealing with agreements reached under threats to breach, courts should replace the duress methodology with a credibility inquiry. It discusses factors that would be relevant under such inquiry. Finally, it demonstrates some of the applications of this approach in the context of leading contract modification cases.