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

  • Warneryd, Karl

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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Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 33 (2000)
Issue (Month): 1 (October)
Pages: 145-158

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Handle: RePEc:eee:gamebe:v:33:y:2000:i:1:p:145-158
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622836

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  1. Skaperdas, Stergios, 1992. "Cooperation, Conflict, and Power in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 82(4), pages 720-39, September.
  2. Michael L. Katz, 1991. "Game-Playing Agents: Unobservable Contracts as Precommitments," RAND Journal of Economics, The RAND Corporation, vol. 22(3), pages 307-328, Autumn.
  3. Caillaud Bernard & Jullien Bruno & Picard Pierre, 1991. "Competing vertical structures : precommitment and renegotiation," CEPREMAP Working Papers (Couverture Orange) 9125, CEPREMAP.
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  9. Nitzan, Shmuel, 1994. "Modelling rent-seeking contests," European Journal of Political Economy, Elsevier, vol. 10(1), pages 41-60, May.
  10. Dixit, Avinash K, 1987. "Strategic Behavior in Contests," American Economic Review, American Economic Association, vol. 77(5), pages 891-98, December.
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  12. Chaim Fershtman & Kenneth L. Judd & Ehud Kalai, 1990. "Observable Contracts: Strategic Delegation and Cooperation," Discussion Papers 879, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  13. Bulow, Jeremy I & Geanakoplos, John D & Klemperer, Paul D, 1985. "Multimarket Oligopoly: Strategic Substitutes and Complements," Journal of Political Economy, University of Chicago Press, vol. 93(3), pages 488-511, June.
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  15. Hirshleifer, Jack, 1991. "The Technology of Conflict as an Economic Activity," American Economic Review, American Economic Association, vol. 81(2), pages 130-34, May.
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  17. Stergios Skaperdas, 1996. "Contest success functions (*)," Economic Theory, Springer, vol. 7(2), pages 283-290.
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