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Conditional versus contingent fees

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  • Winand Emons

Abstract

Under contingent fees the attorney gets a share of the judgement; under conditional fees the lawyer gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a framework where lawyers are uninformed about the clients' cases. If there is asymmetric information about the expected level of adjudication, in equilibrium attorneys will offer only conditional fees. If there is asymmetric information about the risk of cases, only contingent fee contracts are offered in equilibrium. Copyright 2007, Oxford University Press.

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Bibliographic Info

Article provided by Oxford University Press in its journal Oxford Economic Papers.

Volume (Year): 59 (2007)
Issue (Month): 1 (January)
Pages: 89-101

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Handle: RePEc:oup:oxecpp:v:59:y:2007:i:1:p:89-101

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  1. Lynk, William J, 1990. "The Courts and the Market: An Economic Analysis of Contingent Fees in Class-Action Litigation," The Journal of Legal Studies, University of Chicago Press, vol. 19(1), pages 247-60, January.
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  3. Emons, Winand & Garoupa, Nuno, 2004. "The Economics of US-Style Contingent Fees and UK-Style Conditional Fees," CEPR Discussion Papers 4473, C.E.P.R. Discussion Papers.
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  7. Rickman, Neil, 1999. "Contingent fees and litigation settlement1," International Review of Law and Economics, Elsevier, vol. 19(3), pages 295-317, September.
  8. Hellmann, Thomas & Stiglitz, Joseph, 2000. "Credit and equity rationing in markets with adverse selection," European Economic Review, Elsevier, vol. 44(2), pages 281-304, February.
  9. de Meza, David & Webb, David C, 1987. "Too Much Investment: A Problem of Asymmetric Information," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 281-92, May.
  10. Bester, Helmut, 1985. "Screening vs. Rationing in Credit Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 75(4), pages 850-55, September.
  11. Roland Kirstein & Neil Rickman, . "Third Party Contingency contracts in settlement and litigation," German Working Papers in Law and Economics 2002-1-1038, Berkeley Electronic Press.
  12. 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.
  13. 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.
  14. Dana, James D, Jr & Spier, Kathryn E, 1993. "Expertise and Contingent Fees: The Role of Asymmetric Information in Attorney Compensation," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 349-67, October.
  15. Rickman, Neil, 1994. "The Economics of Contingency Fees in Personal Injury Litigation," Oxford Review of Economic Policy, Oxford University Press, vol. 10(1), pages 34-50, Spring.
  16. Emons, Winand, 2000. "Expertise, contingent fees, and insufficient attorney effort," International Review of Law and Economics, Elsevier, vol. 20(1), pages 21-33, March.
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Citations

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Cited by:
  1. Flora Felso & Sander Onderstal & Jo Seldeslachts, 2014. "What Clients want: Choices between Lawyers' Offerings," Tinbergen Institute Discussion Papers 14-020/VII, Tinbergen Institute.
  2. Florian Baumann & Tim Friehe, 2012. "Contingent fees meet the British rule: an exploratory study," Public Choice, Springer, vol. 150(3), pages 499-510, March.
  3. Lorenzo Sacconi, 2011. "The case against lawyers’ contingent fees and the misapplication of principal-agent models," European Journal of Law and Economics, Springer, vol. 32(2), pages 263-292, October.
  4. Winand Emons, 2004. "Playing It Safe with Low Conditional Fees versus Being Insured by High Contingent Fees," Diskussionsschriften dp0419, Universitaet Bern, Departement Volkswirtschaft.
  5. Deffains, Bruno & Langlais, Eric, 2007. "Informational externalities and informational sharing in class action suits," MPRA Paper 4846, University Library of Munich, Germany.
  6. Winand Emons & Claude Fluet, 2013. "Why Plaintiffs' Attorneys Use Contingent and Defense Attorneys Fixed Fee Contracts," Cahiers de recherche 1338, CIRPEE.
  7. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2008. "Trial and settlement negotiations between asymmetrically skilled parties," MPRA Paper 8995, University Library of Munich, Germany.
  8. Baik, Kyung Hwan & Kim, In-Gyu, 2007. "Contingent fees versus legal expenses insurance," International Review of Law and Economics, Elsevier, vol. 27(3), pages 351-361, September.
  9. Emons, Winand & Garoupa, Nuno, 2004. "The Economics of US-Style Contingent Fees and UK-Style Conditional Fees," CEPR Discussion Papers 4473, C.E.P.R. Discussion Papers.
  10. Michael P. Stone, 2010. "Optimal Attorney Advertising," Working papers 2010-14, University of Connecticut, Department of Economics.
  11. Bruno Deffains & Eric Langlais, 2011. "Informational Externalities and Settlements in Mass Tort Litigations," EconomiX Working Papers 2011-14, University of Paris West - Nanterre la Défense, EconomiX.
  12. 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.

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