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Strategic Decisions On Lawyers’ Compensation In Civil Disputes

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  • KYUNG HWAN BAIK
  • IN‐GYU KIM

Abstract

We study a model of civil dispute with delegation in which a plaintiff’s lawyer works on a contingent‐fee basis but a defendant’s lawyer on an hourly fee basis. We first derive the condition under which delegation to the lawyers brings both litigants more payoffs compared with the case of no delegation. We then show that under this profitable delegation condition, the contingent‐fee fraction for the plaintiff’s lawyer is about one‐third. Next, allowing the plaintiff to choose between the two fees, we show that under the profitable delegation condition, the plaintiff chooses the contingent fee, given that the defendant adopts the hourly fee. (JEL K41, K13, D74, D72)

Suggested Citation

  • Kyung Hwan Baik & In‐Gyu Kim, 2007. "Strategic Decisions On Lawyers’ Compensation In Civil Disputes," Economic Inquiry, Western Economic Association International, vol. 45(4), pages 854-863, October.
    • Handle: RePEc:bla:ecinqu:v:45:y:2007:i:4:p:854-863
    DOI: 10.1111/j.1465-7295.2007.00054.x
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    Cited by:

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    2. Rosa Ferrer, 2015. "The Effect of Lawyers' Career Concerns on Litigation," Working Papers 844, Barcelona School of Economics.
    3. Emons, Winand & Fluet, Claude, 2016. "Why plaintiffs’ attorneys use contingent and defense attorneys fixed fee contracts," International Review of Law and Economics, Elsevier, vol. 47(C), pages 16-23.
    4. Park Sung-Hoon & Lee Sanghack, 2019. "How Do Risk-Averse Litigants Set Contingent Fees for Risk-Neutral Lawyers?," Review of Law & Economics, De Gruyter, vol. 15(2), pages 1-19, July.
    5. Florian Baumann & Tim Friehe, 2012. "Emotions in litigation contests," Economics of Governance, Springer, vol. 13(3), pages 195-215, September.
    6. Baharad, Roy & Cohen, Chen & Nitzan, Shmuel, 2022. "Litigation with adversarial efforts," International Review of Law and Economics, Elsevier, vol. 69(C).
    7. Sung-Hoon Park, 2022. "Contingent fees and endogenous timing in litigation contests," European Journal of Law and Economics, Springer, vol. 54(3), pages 453-473, 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. Tim Friehe, 2011. "On being asset-constrained in litigation contests," Public Choice, Springer, vol. 147(3), pages 277-284, June.
    10. Florian Baumann & Tim Friehe, 2013. "A note on the timing of investments in litigation contests," European Journal of Law and Economics, Springer, vol. 35(3), pages 313-326, June.
    11. 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.

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    More about this item

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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