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In Defense of Lawyers: Moral Hazard as an Aid to Cooperation

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  • Warneryd, Karl

Abstract

This paper studies strategic delegation in two-player contests for an indivisible prize (as in, e.g. litigation) where one party's probability of winning is determined by the relative investments of both. Even though neither player stands to gain anything from the possibility of one player committing himself to an investment level, both players ex ante prefer compulsory representation by agents (e.g. lawyers) whose efforts are unobservable. Thus this paper points out a role for delegation with moral hazard in facilitating cooperation.
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  • Warneryd, Karl, 2000. "In Defense of Lawyers: Moral Hazard as an Aid to Cooperation," Games and Economic Behavior, Elsevier, vol. 33(1), pages 145-158, October.
  • Handle: RePEc:eee:gamebe:v:33:y:2000:i:1:p:145-158
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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