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Contingent Fees for Personal Injury Litigation

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Author Info
Patricia Munch Danzon

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Abstract

This study present a theoretical analysis of contingent fee and hourly wage contracts for legal services. In contrast to previous analyses, it concludes that with risk neutral plaintiffs and attorneys, the contingent fee induces the amount of attorney's effort that would be chosen by a fully informed plaintiff who was paying an attorney by the hour. Both the expected gross recovery and the expected attorney's fee are the same under a contingent fee as they are under an hourly fee system. For the risk averse plaintiff, expected utility is unambiguously higher with a contingent fee. Empirically based estimates show that regulation of contingent fees may have significant effects on the number of suits and the size of awards.

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File URL: http://links.jstor.org/sici?sici=0361-915X%28198321%2914%3A1%3C213%3ACFFPIL%3E2.0.CO%3B2-B&origin=repec
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Publisher Info
Article provided by The RAND Corporation in its journal Bell Journal of Economics.

Volume (Year): 14 (1983)
Issue (Month): 1 (Spring)
Pages: 213-224
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:rje:bellje:v:14:y:1983:i:spring:p:213-224

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Web page: http://www.rje.org

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  1. Nuno Garoupa & Fernando Gomez-Pomar, . "Cashing By The Hour: Why Large Lawfirms Prefer Hourly Fees Over Contingent Fees," German Working Papers in Law and Economics 2003-1-1056, Berkeley Electronic Press. [Downloadable!]
  2. A. Mitchell Polinsky & Daniel Rubinfeld, 2001. "Aligning the Interests of Lawyers and Clients," Berkeley Olin Program in Law & Economics, Working Paper Series 1023, Berkeley Olin Program in Law & Economics. [Downloadable!]
    Other versions:
  3. 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:
  4. repec:bep:rlecon:2:2007:3:2 is not listed on IDEAS
  5. Hans-Bernd Schaefer, 2000. "The Bundling of Similar Interests in Litigation. The Incentives for Class Action and Legal Actions taken by Associations," European Journal of Law and Economics, Springer, vol. 9(3), pages 183-213, May. [Downloadable!] (restricted)
  6. Josh Lerner, 2008. "The Litigation of Financial Innovations," NBER Working Papers 14324, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Rudy Santore & Alan D. Viard, 1999. "Legal fee restrictions, moral hazard, and attorney profits," Working Papers 99-12, Federal Reserve Bank of Dallas. [Downloadable!]
  8. Winand Emons, 2004. "Conditional versus Contingent Fees," Diskussionsschriften dp0409, Universitaet Bern, Departement Volkswirtschaft. [Downloadable!]
    Other versions:
  9. Nuno Garoupa & Fernando Gómez, 2002. "Cashing by the Hour: Why Large Law Firms Prefer Hourly Fees Over Contingent Fees," Economics Working Papers 639, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  10. Douglas Cumming, 2001. "Settlement Disputes: Evidence from a Legal Practice Perspective," European Journal of Law and Economics, Springer, vol. 11(3), pages 249-280, May. [Downloadable!] (restricted)
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