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Economic and Psychological Insights into the Process of Claiming and Agreeing Damages and Costs

In: Access to Justice

Author

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  • John Peysner

    (University of Lincoln)

Abstract

The relationship between client and attorney operating on an hourly fees basis classically exhibits the principal agent problem or dilemma. The client, as principal in the case, must motivate the attorney, who is the agent, to pursue the client’s interests. Hourly fees may not do this, as it is difficult for the client to know how diligently the attorney is working. The attorney may, for example, conduct the case to maximise the hourly fees. This is a case of moral hazard stemming from the hidden nature of the attorney’s action. A classic solution to the principal’s problem in cases where the agent’s actions are hidden but the output may be observed, is to make the agent’s rewards contingent on the level of output. By this reasoning, contingent fees may be seen as a useful device for ensuring that [attorneys] deliver services efficiently.1

Suggested Citation

  • John Peysner, 2014. "Economic and Psychological Insights into the Process of Claiming and Agreeing Damages and Costs," Palgrave Macmillan Books, in: Access to Justice, chapter 8, pages 79-92, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-137-39723-2_8
    DOI: 10.1057/9781137397232_8
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