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Lawyers as Agents of the Devil in a Prisoner's Dilemma Game: Evidence from Long Run Play

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  • Ashenfelter, Orley

    (Princeton University)

  • Bloom, David E.

    (Harvard School of Public Health)

  • Dahl, Gordon B.

    (University of California, San Diego)

Abstract

Do the parties in a typical dispute face incentives similar to those in the classic prisoner's dilemma game? In this paper, we explore whether the costs and benefits of legal representation are such that each party seeks legal representation in the hope of exploiting the other party, while knowing full well that failing to do so will open up the possibility of being exploited. The paper first shows how it is possible to test for the presence of such an incentive structure in a typical dispute resolution system. It then reports estimates of the incentives for the parties to obtain legal representation in wage disputes that were settled by final-offer arbitration in New Jersey. The paper also reports briefly on similar studies of data from discharge grievances, court-annexed disputes in Pittsburgh, and child custody disputes in California. In each case, the data provide evidence that the parties face strong individual incentives to obtain legal representation which makes the parties jointly worse off. Using our New Jersey data, we find that expert agents may well have played a productive role in moderating the biases of their clients, but only early on in the history of the system. Over time, the parties slowly evolved to a non-cooperative equilibrium where the use of lawyers becomes nearly universal, despite the fact that agreeing not to hire lawyers is cheaper and does not appear to alter arbitration outcomes.

Suggested Citation

  • Ashenfelter, Orley & Bloom, David E. & Dahl, Gordon B., 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game: Evidence from Long Run Play," IZA Discussion Papers 7245, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7245
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    Cited by:

    1. Marselli, Riccardo & McCannon, Bryan C. & Vannini, Marco, 2015. "Bargaining in the shadow of arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 356-368.
    2. Juranek, Steffen, 2015. "Investing in legal advice - What determines the costs of enforcing intellectual property rights?," Discussion Papers 2015/20, Norwegian School of Economics, Department of Business and Management Science.
    3. J. Ryan Lamare, 2020. "The Devil Is in the Details: Attorney Effects on Employment Arbitration Outcomes," ILR Review, Cornell University, ILR School, vol. 73(2), pages 456-478, March.
    4. Juranek, Steffen, 2018. "Investing in legal advice," Information Economics and Policy, Elsevier, vol. 44(C), pages 28-46.
    5. Hagmann, David & Feiler, Daniel, 2020. "The Agent-Selection Dilemma in Distributive Bargaining," OSF Preprints y6tq2, Center for Open Science.
    6. Ernan Haruvy & Yefim Roth, 2022. "On the Impact of an Intermediary Agent in the Ultimatum Game," Games, MDPI, vol. 13(3), pages 1-16, May.

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    More about this item

    Keywords

    arbitration; prisoner's dilemma; lawyers;
    All these keywords.

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • K0 - Law and Economics - - General

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