When attorney effort is unobservable and certain other simplifying assumptions (such as risk neutrality) hold, it is efficient for an attorney to purchase the rights to a client's legal claim. However, the American Bar Association Model Rules of Professional Conduct prohibit this arrangement. We show that this ethical restriction, which is formally equivalent to requiring a minimum fixed fee of zero, can create economic rents for attorneys, even though they continue to compete along the contingent-fee dimension. The contingent fee is not bid down to the zero-profit level, because such a fee does not induce sufficient attorney effort. We thereby provide a political economy explanation for these restrictions. Copyright 2001 by the University of Chicago.
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Volume (Year): 44 (2001) Issue (Month): 2 (October) Pages: 549-72 Download reference. The following formats are available: HTML
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Handle: RePEc:ucp:jlawec:v:44:y:2001:i:2:p:549-72
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