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Contingent Fees and Agency Costs

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Author Info
Hay, Bruce L
Abstract

In this article, I examine the operation of ordinary linear contingent fees in a model of litigation in which the recovery on a claim is a function of the lawyer's efforts. My object here is to analyze the linear fee that maximizes the client's welfare in the presence of attorney moral hazard. I identify the optimal fee as the one that minimizes two agency costs: underinvestment in the claim, and attorney rents. I also attempt to identify how the optimal linear fee varies with different case characteristics. Copyright 1996 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Legal Studies.

Volume (Year): 25 (1996)
Issue (Month): 2 (June)
Pages: 503-33
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlstud:v:25:y:1996:i:2:p:503-33

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  1. repec:bep:dewple:2003-1-1056 is not listed on IDEAS
  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. Rudy Santore & Alan D. Viard, 1999. "Legal fee restrictions, moral hazard, and attorney profits," Working Papers 99-12, Federal Reserve Bank of Dallas. [Downloadable!]
  5. 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!]
  6. 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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This page was last updated on 2009-11-16.


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