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Playing It Safe with Low Conditional Fees versus Being Insured by High Contingent Fees

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  • Winand Emons

Abstract

Under contingent fees the attorney gets a share of the judgment; under conditional fees he 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 framework where lawyers choose between a safe and a risky litigation strategy. Under conditional fees lawyers prefer the safe strategy, under contingent fess the risky one. Risk-averse plaintiffs prefer conditional fees over contingent fees when lawyering costs are low and vice versa for high lawyering costs

Suggested Citation

  • Winand Emons, 2004. "Playing It Safe with Low Conditional Fees versus Being Insured by High Contingent Fees," Diskussionsschriften dp0419, Universitaet Bern, Departement Volkswirtschaft.
    • Handle: RePEc:ube:dpvwib:dp0419
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    References listed on IDEAS

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    1. Winand Emons, 2007. "Conditional versus contingent fees," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 89-101, January.
    2. Roland Kirstein & Neil Rickman, 2004. ""Third Party Contingency" Contracts in Settlement and Litigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 555-575, December.
    3. Winand Emons & Nuno Garoupa, 2004. "The Economics of US-style Contingent Fees and UK-style Conditional Fees," Diskussionsschriften dp0407, Universitaet Bern, Departement Volkswirtschaft.
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    Cited by:

    1. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    2. At Christian & Friehe Tim & Gabuthy Yannick, 2019. "On Lawyer Compensation When Appeals Are Possible," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-11, April.
    3. Bruno Deffains & Eric Langlais, 2011. "Informational externalities and settlements in mass tort litigations," European Journal of Law and Economics, Springer, vol. 32(2), pages 241-262, October.
    4. Bruno Deffains & Eric Langlais, 2011. "Informational Externalities and Settlements in Mass Tort Litigations," Working Papers hal-04141000, HAL.
    5. Friehe, Tim & Gabuthy, Yannick & Lambert, Eve-Angéline, 2020. "Settlement implications of lawyer advertising," International Review of Law and Economics, Elsevier, vol. 61(C).
    6. Zamir Eyal & Medina Barak & Segal Uzi, 2014. "Who Benefits from the Uniformity of Contingent Fee Rates?," Review of Law & Economics, De Gruyter, vol. 9(3), pages 357-387, January.
    7. Friehe, Tim, 2010. "Contingent fees and legal expenses insurance: Comparison for varying defendant fault," International Review of Law and Economics, Elsevier, vol. 30(4), pages 283-290, December.
    8. Florian Baumann & Tim Friehe, 2012. "Contingent fees meet the British rule: an exploratory study," Public Choice, Springer, vol. 150(3), pages 499-510, March.
    9. At, Christian & Gabuthy, Yannick, 2015. "Moral hazard and agency relationship in sequential litigation," International Review of Law and Economics, Elsevier, vol. 41(C), pages 86-90.
    10. Deffains, Bruno & Langlais, Eric, 2007. "Informational externalities and informational sharing in class action suits," MPRA Paper 4846, University Library of Munich, Germany.
    11. Yannick Gabuthy & Pierre-Henri Morand, 2019. "Lawyer Fee Arrangements and Litigation Outcomes: An Auction-Theoretic Perspective," Working Papers of BETA 2019-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.

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    More about this item

    Keywords

    contingent fees; conditional fees; risk aversion; insurance; incentives;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K1 - Law and Economics - - Basic Areas of Law

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