Contingent fee caps, screening, and the quality of legal services
In theory, contingent fees can reduce the effects of informational asymmetries by allowing clients to screen low-quality attorneys who obtain smaller awards in expectation. We experimentally examine whether clients possess the sophistication necessary to design screening contracts and how contingent fee caps affect a client's ability to screen. When contingent fees are unrestricted, we find that most subjects are able to design contracts that screen low-quality attorneys, resulting in an increase in the quality of legal services. However, we find that contingent fee caps decrease the frequency of screening even if the cap is non-binding. Caps on contingent fees also reduce clients’ ability to extract surplus, allowing attorneys to earn greater profits.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 32 (2012)
Issue (Month): 3 ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/irle|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Emons, Winand, 2000. "Expertise, contingent fees, and insufficient attorney effort," International Review of Law and Economics, Elsevier, vol. 20(1), pages 21-33, March.
- Lata Gangadharan & Veronika Nemes, 2009. "Experimental Analysis Of Risk And Uncertainty In Provisioning Private And Public Goods," Economic Inquiry, Western Economic Association International, vol. 47(1), pages 146-164, 01.
- Eyal Zamir & Ilana Ritov, 2010. "Revisiting the Debate over Attorneys' Contingent Fees: A Behavioral Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 39(1), pages 245-288, 01.
- Glenn Harrison & John List & Charles Towe, 2004.
"Naturally occurring preferences and exogenous laboratory experiments: A case study of risk aversion,"
Framed Field Experiments
00155, The Field Experiments Website.
- Glenn W Harrison & John A List & Charles Towe, 2007. "Naturally Occurring Preferences and Exogenous Laboratory Experiments: A Case Study of Risk Aversion," Econometrica, Econometric Society, vol. 75(2), pages 433-458, 03.
- Dana, James D, Jr & Spier, Kathryn E, 1993. "Expertise and Contingent Fees: The Role of Asymmetric Information in Attorney Compensation," Journal of Law, Economics and Organization, Oxford University Press, vol. 9(2), pages 349-367, October.
- Evans, Mary F. & Vossler, Christian A. & Flores, Nicholas E., 2009. "Hybrid allocation mechanisms for publicly provided goods," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 311-325, February.
- Bellemare, Charles & Shearer, Bruce S., 2006.
"Sorting, Incentives and Risk Preferences: Evidence from a Field Experiment,"
IZA Discussion Papers
2227, Institute for the Study of Labor (IZA).
- Bellemare, Charles & Shearer, Bruce, 2010. "Sorting, incentives and risk preferences: Evidence from a field experiment," Economics Letters, Elsevier, vol. 108(3), pages 345-348, September.
- Charles Bellemare & Bruce S. Shearer, 2006. "Sorting, Incentives and Risk Preferences: Evidence from a Field Experiment," Cahiers de recherche 0631, CIRPEE.
- repec:feb:framed:0074 is not listed on IDEAS
- Steven Shavell, 1979. "Risk Sharing and Incentives in the Principal and Agent Relationship," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 55-73, Spring.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
- Fehr, Ernst & Schmidt, Klaus M., .
"A theory of fairness, competition, and cooperation,"
Chapters in Economics,
University of Munich, Department of Economics.
- Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, vol. 114(3), pages 817-868.
- Fehr, Ernst & Schmidt, Klaus M., 1998. "A Theory of Fairness, Competition and Cooperation," CEPR Discussion Papers 1812, C.E.P.R. Discussion Papers.
- Fehr, Ernst & Schmidt, Klaus M., 1999. "A theory of fairness, competition, and cooperation," Munich Reprints in Economics 20650, University of Munich, Department of Economics.
- Ernst Fehr & Klaus M. Schmidt, "undated". "A Theory of Fairness, Competition and Cooperation," IEW - Working Papers 004, Institute for Empirical Research in Economics - University of Zurich.
- In-Koo Cho & David M. Kreps, 1997.
"Signaling Games and Stable Equilibria,"
Levine's Working Paper Archive
896, David K. Levine.
- A. Mitchell Polinsky & Daniel L. Rubinfeld, 2003. "Aligning the Interests of Lawyers and Clients," American Law and Economics Review, Oxford University Press, vol. 5(1), pages 165-188.
- Andreoni, James, 1995.
"Cooperation in Public-Goods Experiments: Kindness or Confusion?,"
American Economic Review,
American Economic Association, vol. 85(4), pages 891-904, September.
- Andreoni, J., 1993. "Cooperation in Public Goods Experiments: Kindness or Confusion?," Working papers 9309, Wisconsin Madison - Social Systems.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- Daniel F. Rubinfeld & Suzanne Scotchmer, 1993. "Contingent Fees for Attorneys: An Economic Analysis," RAND Journal of Economics, The RAND Corporation, vol. 24(3), pages 343-356, Autumn.
- Daniel Zizzo, 2010. "Experimenter demand effects in economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 13(1), pages 75-98, March.
- Hay, Bruce L, 1996. "Contingent Fees and Agency Costs," The Journal of Legal Studies, University of Chicago Press, vol. 25(2), pages 503-533, June.
- David Dickinson, 2009. "The Effects of Beliefs Versus Risk Attitude on Bargaining Outcomes," Theory and Decision, Springer, vol. 66(1), pages 69-101, January.
- Patricia Munch Danzon, 1983. "Contingent Fees for Personal Injury Litigation," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 213-224, Spring.
- Eric Helland, 2003. "Contingency Fees, Settlement Delay, and Low-Quality Litigation: Empirical Evidence from Two Datasets," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(2), pages 517-542, October.
- Michael McKee & Rudy Santore & Joel Shelton, 2007. "Contingent Fees, Moral Hazard, and Attorney Rents: A Laboratory Experiment," The Journal of Legal Studies, University of Chicago Press, vol. 36(2), pages 253-273, 06.
- Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, vol. 90(1), pages 166-193, March.
- Duncan James, 2007. "Stability of risk preference parameter estimates within the Becker-DeGroot-Marschak procedure," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 123-141, June.
- Christine Piette Durrance, 2010. "Noneconomic Damage Caps and Medical Malpractice Claim Frequency: A Policy Endogeneity Approach," Journal of Law, Economics and Organization, Oxford University Press, vol. 26(3), pages 569-591.
When requesting a correction, please mention this item's handle: RePEc:eee:irlaec:v:32:y:2012:i:3:p:317-328. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.