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What Clients want: Choices between Lawyers' Offerings

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Author Info

  • Flora Felso

    (Netherlands Bureau for Economic Policy Analysis (CPB), the Netherlands)

  • Sander Onderstal

    (University of Amsterdam)

  • Jo Seldeslachts

    (University of Amsterdam)

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    Abstract

    We analyze a client's choice of contract in auctions where Dutch law firms compete for routine cases. The distinguishing feature here is that lawyers may submit bids with any fee arrangement they prefer: an hourly rate, a fixed fee or a mixed fee, "which is a time-capped fixed fee plus an hourly rate for any additional hours should the case take longer than expected. Furthermore, this format of selling legal services is unusual in that it both forces lawyers to compete directly against each other and allows clients to easily compare these different offers. We empirically estimate a choice model for clients and find robust evidence that hourly rate bids are a client's least-preferred choice. Our findings tentatively contradict lawyers' often made argument that hourly rates are in a client's best interest.

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    Bibliographic Info

    Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 14-020/VII.

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    Date of creation: 10 Feb 2014
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    Handle: RePEc:dgr:uvatin:20140020

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    Web page: http://www.tinbergen.nl

    Related research

    Keywords: Lawyers' fee arrangements; clients' choices; discrete choice models;

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    1. Emons, Winand, 2004. "Conditional versus Contingent Fees," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4532, C.E.P.R. Discussion Papers.
    2. Kenneth Train, 2003. "Discrete Choice Methods with Simulation," Online economics textbooks, SUNY-Oswego, Department of Economics, SUNY-Oswego, Department of Economics, number emetr2, Spring.
    3. 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.
    4. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195102680, October.
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