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US-style contingent fees and UK-style conditional fees: agency problems and the supply of legal services

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Author Info
Winand Emons (Departement Volkswirtschaft, Universität Bern, Schanzeneckstrasse 1, Postfach 8573, CH-3001 Bern, Switzerland)
Nuno Garoupa (Faculdade de Economia, Universidade Nova de Lisboa, Campus de Campolide, P-1099-032 Lisboa, Portugal)

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Abstract

Under contingent fees, the attorney gets a share of the judgment; 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 principal-agent framework where the lawyer chooses unobservable effort after she has observed the amount at stake. Contingent fees provide better incentives than conditional fees independently of whether upfront payments are restricted to be non-negative or not. Under contingent fees, the attorney uses her information about what is at stake more efficiently. Copyright © 2006 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1269
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 27 (2006)
Issue (Month): 5 ()
Pages: 379-385
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:27:y:2006:i:5:p:379-385

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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  1. Daniel F. Rubinfeld & Suzanne Scotchmer, 1993. "Contingent Fees for Attorneys: An Economic Analysis," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 343-356, Autumn. [Downloadable!] (restricted)
  2. 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. [Downloadable!]
    Other versions:
  3. 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.
  4. Emons, Winand, 2000. "Expertise, contingent fees, and insufficient attorney effort," International Review of Law and Economics, Elsevier, vol. 20(1), pages 21-33, March. [Downloadable!] (restricted)
  5. Emons, Winand, 2004. "Conditional versus Contingent Fees," CEPR Discussion Papers 4532, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Lynk, William J, 1990. "The Courts and the Market: An Economic Analysis of Contingent Fees in Class-Action Litigation," Journal of Legal Studies, University of Chicago Press, vol. 19(1), pages 247-60, January.
  7. 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!]
  8. Halpern, P. J. & Turnbull, S. M., 1983. "Legal fees contracts and alternative cost rules: An economic analysis," International Review of Law and Economics, Elsevier, vol. 3(1), pages 3-26, June. [Downloadable!] (restricted)
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