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Free choice of legal fee shifting rules?

Author

Listed:
  • Christian Schwab

    ()

  • Hin-Yue Tang
  • Stefan Winter

Abstract

In every country in the world parties to private litigation are subject to a predetermined fee shifting regime. While there are no institutionalized opt-out provisions so far, we demonstrate that such provisions could improve welfare. We argue that private negotiations are not a viable alternative to such opt-out provisions. We derive the conditions under which welfare improvements occur and suggest an applicable design for such an opt-out scheme. Copyright Springer Science+Business Media, LLC 2014

Suggested Citation

  • Christian Schwab & Hin-Yue Tang & Stefan Winter, 2014. "Free choice of legal fee shifting rules?," European Journal of Law and Economics, Springer, vol. 37(2), pages 299-324, April.
  • Handle: RePEc:kap:ejlwec:v:37:y:2014:i:2:p:299-324
    DOI: 10.1007/s10657-011-9296-x
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    References listed on IDEAS

    as
    1. Polinsky, A Mitchell & Rubinfeld, Daniel L, 1998. "Does the English Rule Discourage Low-Probability-of-Prevailing Plaintiffs?," The Journal of Legal Studies, University of Chicago Press, vol. 27(1), pages 141-157, January.
    2. Kathryn E. Spier, 1994. "Pretrial Bargaining and the Design of Fee-Shifting Rules," RAND Journal of Economics, The RAND Corporation, vol. 25(2), pages 197-214, Summer.
    3. Hersch, Philip L, 1990. "Indemnity, Settlement, and Litigation: Comment and Extension," The Journal of Legal Studies, University of Chicago Press, vol. 19(1), pages 235-241, January.
    4. Michael R. Baye & Dan Kovenock & Casper G. Vries, 2005. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Economic Journal, Royal Economic Society, vol. 115(505), pages 583-601, July.
    5. Hause, John C, 1989. "Indemnity, Settlement, and Litigation, or I'll Be Suing You," The Journal of Legal Studies, University of Chicago Press, vol. 18(1), pages 157-179, January.
    6. Hughes, James W & Snyder, Edward A, 1995. "Litigation and Settlement under the English and American Rules: Theory and Evidence," Journal of Law and Economics, University of Chicago Press, vol. 38(1), pages 225-250, April.
    7. Snyder, Edward A & Hughes, James W, 1990. "The English Rule for Allocating Legal Costs: Evidence Confronts Theory," Journal of Law, Economics, and Organization, Oxford University Press, vol. 6(2), pages 345-380, Fall.
    8. William M. Landes, 1974. "An Economic Analysis of the Courts," NBER Chapters, in: Essays in the Economics of Crime and Punishment, pages 164-214, National Bureau of Economic Research, Inc.
    9. Jue-Shyan Wang, 2007. "Fee-Shifting Rules in Litigation with Contingency Fees," Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 519-546, October.
    10. Cooter, Robert D & Rubinfeld, Daniel L, 1989. "Economic Analysis of Legal Disputes and Their Resolution," Journal of Economic Literature, American Economic Association, vol. 27(3), pages 1067-1097, September.
    11. Katz, Avery, 1987. "Measuring the Demand for Litigation: Is the English Rule Really Cheaper?," Journal of Law, Economics, and Organization, Oxford University Press, vol. 3(2), pages 143-176, Fall.
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    More about this item

    Keywords

    Fee shifting; American rule; English rule; Winner rule; Opt-out provision; K40; K41;

    JEL classification:

    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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