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"Third Party Contingency" Contracts in Settlement and Litigation

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Author Info
Roland Kirstein
Neil Rickman

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Abstract

We present a model of recent institutional developments in litigation funding across several European jurisdictions. They combine contingency fees with third party cover for cost in the event of losing the case: we call these "Third Party Contingency" (TPC) contracts. A TPC contract can make filing a suit credible and may increase settlement amounts. This does not, however, increase the likelihood of going to trial, since TPC contracts are only of mutual benefit to the plaintiff and the third party when the case settles out of court. We demonstrate that the mere availability of TPCs may generate this strategic effect.

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 160 (2004)
Issue (Month): 4 (December)
Pages: 555-
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200412)160:4_555:tpccis_2.0.tx_2-q

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Find related papers by JEL classification:
K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Barry Nalebuff, 1987. "Credible Pretrial Negotiation," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 198-210, Summer. [Downloadable!] (restricted)
  2. Gravelle, Hugh & Waterson, Michael, 1993. "No Win, No Fee: Some Economics of Contingent Legal Fees," Economic Journal, Royal Economic Society, vol. 103(420), pages 1205-20, September. [Downloadable!] (restricted)
  3. Neil Rickman & Paul Fenn & Alastair Gray, 1999. "The reform of Legal Aid in England and Wales," Fiscal Studies, Institute for Fiscal Studies, vol. 20(3), pages 261-286, September. [Downloadable!]
  4. Landes, William M, 1971. "An Economic Analysis of the Courts," Journal of Law & Economics, University of Chicago Press, vol. 14(1), pages 61-107, April.
  5. Waldfogel, Joel, 1998. "Reconciling Asymmetric Information and Divergent Expectations Theories of Litigation," Journal of Law & Economics, University of Chicago Press, vol. 41(2), pages 451-76, October.
    Other versions:
  6. Lucian Arye Bebchuk, 1984. "Litigation and Settlement under Imperfect Information," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 404-415, Autumn. [Downloadable!] (restricted)
  7. repec:pal:gpprii:v:25:y:2000:i:2:p:251-261 is not listed on IDEAS
  8. Rickman, Neil, 1999. "Contingent fees and litigation settlement1," International Review of Law and Economics, Elsevier, vol. 19(3), pages 295-317, September. [Downloadable!] (restricted)
  9. A. Mitchell Polinsky & Daniel L. Rubinfeld, 2003. "Aligning the Interests of Lawyers and Clients," American Law and Economics Review, Oxford University Press, vol. 5(1), pages 165-188.
    Other versions:
  10. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer. [Downloadable!] (restricted)
  11. Lucian Arye Bebchuk, 1998. "Negative Expected Value Suits," NBER Working Papers 6474, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Bebchuk, Lucian Arye, 1996. "A New Theory Concerning the Credibility and Success of Threats to Sue," Journal of Legal Studies, University of Chicago Press, vol. 25(1), pages 1-25, January.
  13. Kirstein, Roland & Schmidtchen, Dieter, 1997. "Judicial detection skill and contractual compliance," International Review of Law and Economics, Elsevier, vol. 17(4), pages 509-520, December. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Emons, Winand, 2005. "Playing it Safe with Low Conditional Fees versus Being Insured by High Contingent Fees," CEPR Discussion Papers 4841, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Winand Emons & Nuno Garoupa, 2004. "The Economics of US-style Contingent Fees and UK-style Conditional Fees," Diskussionsschriften dp0407, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
    Other versions:
  3. Roland Kirstein, . "Anti-Teilen in Teams," German Working Papers in Law and Economics 2005-1-1127, Berkeley Electronic Press. [Downloadable!]
  4. Winand Emons & Nuno Garoupa, 2006. "US-style contingent fees and UK-style conditional fees: agency problems and the supply of legal services," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(5), pages 379-385. [Downloadable!]
  5. Roland Kirstein, 2009. "Optimal Delegation in Nash Bargaining," FEMM Working Papers 09001, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management. [Downloadable!]
  6. Dieter Schmidtchen, . "Wozu Strafrecht? Another View of the Cathedral," German Working Papers in Law and Economics 2002-1-1041, Berkeley Electronic Press. [Downloadable!]
  7. Winand Emons, 2004. "Conditional versus Contingent Fees," Diskussionsschriften dp0409, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
    Other versions:
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