IDEAS home Printed from https://ideas.repec.org/p/apc/wpaper/2015-052.html
   My bibliography  Save this paper

Financially-Constrained Lawyers

Author

Listed:
  • Claudia M. Landeo

    (University of Alberta)

  • Maxim Nikitin

    (International College of Economics and Finance, NRU HSE)

Abstract

Financial constraints reduce the lawyers' ability to file lawsuits and bring cases to trial. As a result, access to justice for true victims, bargaining impasse, and care-taking incentives for potential injurers might be affected. We present the first cradle-to-grave model of legal disputes involving financially-constrained lawyers, third-party lawyer lending, and asymmetric information. In equilibrium, access to justice is denied to some true victims and bargaining impasse occurs. We demonstrate that policies that relax lawyers' financial constraints might be welfare reducing if the positive impact on access to justice is weak and the potential injurers are overdeterred.

Suggested Citation

  • Claudia M. Landeo & Maxim Nikitin, 2015. "Financially-Constrained Lawyers," Working Papers 52, Peruvian Economic Association.
    • Handle: RePEc:apc:wpaper:2015-052
    as

    Download full text from publisher

    File URL: http://perueconomics.org/wp-content/uploads/2014/01/WP-52.pdf
    File Function: Application/pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew F. Daughety & Jennifer F. Reinganum, 2014. "The Effect of Third-Party Funding of Plaintiffs on Settlement," American Economic Review, American Economic Association, vol. 104(8), pages 2552-2566, August.
    2. Kathryn E. Spier, 1992. "The Dynamics of Pretrial Negotiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 59(1), pages 93-108.
    3. Hillinger, Claude & Lapham, Victoria, 1971. "The Impossibility of a Paretian Liberal: Comment by Two Who are Unreconstructed," Journal of Political Economy, University of Chicago Press, vol. 79(6), pages 1403-1405, Nov.-Dec..
    4. Peter A. Diamond, 1967. "Cardinal Welfare, Individualistic Ethics, and Interpersonal Comparison of Utility: Comment," Journal of Political Economy, University of Chicago Press, vol. 75, pages 765-765.
    5. Deb, Rajat & Pattanaik, Prasanta K. & Razzolini, Laura, 1997. "Game Forms, Rights, and the Efficiency of Social Outcomes," Journal of Economic Theory, Elsevier, vol. 72(1), pages 74-95, January.
    6. Hylton, Keith N, 1993. "Litigation Cost Allocation Rules and Compliance with the Negligence Standard," The Journal of Legal Studies, University of Chicago Press, vol. 22(2), pages 457-476, June.
    7. Claudia M. Landeo & Maxim Nikitin & Scott Baker, 2007. "Deterrence, Lawsuits, and Litigation Outcomes Under Court Errors," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(1), pages 57-97, April.
    8. Dominique Demougin & Felix Maultzsch, 2014. "Third-Party Financing of Litigation: Legal Approaches and a Formal Model," CESifo Economic Studies, CESifo, vol. 60(3), pages 525-553.
    9. Landeo, Claudia M. & Nikitin, Maxim & Babcock, Linda, 2007. "Split-awards and disputes: An experimental study of a strategic model of litigation," Journal of Economic Behavior & Organization, Elsevier, vol. 63(3), pages 553-572, July.
    10. Louis Kaplow & Steven Shavell, 2001. "Any Non-welfarist Method of Policy Assessment Violates the Pareto Principle," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 281-286, April.
    11. Claudia M. Landeo, 2018. "Law and economics and tort litigation institutions: theory and experiments," Chapters, in: Joshua C. Teitelbaum & Kathryn Zeiler (ed.), Research Handbook on Behavioral Law and Economics, chapter 9, pages 247-268, Edward Elgar Publishing.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Landeo, Claudia M. & Nikitin, Maxim, 2018. "Financially-constrained lawyers: An economic theory of legal disputes," Games and Economic Behavior, Elsevier, vol. 109(C), pages 625-647.
    2. Landeo, Claudia & Nikitin, Maxim & Izmalkov, Sergei, 2012. "Playing against an Apparent Opponent: Incentives for Care, Litigation, and Damage Caps under Self-Serving Bias," Working Papers 2012-15, University of Alberta, Department of Economics, revised 01 Oct 2012.
    3. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    4. Antill, Samuel & Grenadier, Steven R., 2023. "Financing the litigation arms race," Journal of Financial Economics, Elsevier, vol. 149(2), pages 218-234.
    5. Campos, Sergio J. & Cotton, Christopher S. & Li, Cheng, 2015. "Deterrence effects under Twombly: On the costs of increasing pleading standards in litigation," International Review of Law and Economics, Elsevier, vol. 44(C), pages 61-71.
    6. Friehe, Tim & Pham, Cat Lam, 2021. "Accident avoidance and settlement bargaining: The role of reciprocity," International Review of Law and Economics, Elsevier, vol. 68(C).
    7. Koçkesen, Levent & Usman, Murat, 2012. "Litigation and settlement under judicial agency," International Review of Law and Economics, Elsevier, vol. 32(3), pages 300-308.
    8. Landeo, Claudia & Nikitin, Maxim, 2015. "Effective Labor Relations Laws and Social Welfare," Working Papers 2015-11, University of Alberta, Department of Economics.
    9. Claudia M. Landeo, 2018. "Law and economics and tort litigation institutions: theory and experiments," Chapters, in: Joshua C. Teitelbaum & Kathryn Zeiler (ed.), Research Handbook on Behavioral Law and Economics, chapter 9, pages 247-268, Edward Elgar Publishing.
    10. Mongin, Philippe, 2019. "Interview of Peter J. Hammond," CRETA Online Discussion Paper Series 50, Centre for Research in Economic Theory and its Applications CRETA.
    11. A. Mitchell Polinsky & Steven Shavell, 2005. "Economic Analysis of Law," Discussion Papers 05-005, Stanford Institute for Economic Policy Research.
    12. Landeo, Claudia M., 2009. "Cognitive coherence and tort reform," Journal of Economic Psychology, Elsevier, vol. 30(6), pages 898-912, December.
    13. Landeo, Claudia M., 2009. "Tort Reform, Disputes and Belief Formation," MPRA Paper 13453, University Library of Munich, Germany.
    14. Wohlschlegel, Ansgar, 2014. "The Appeals Process and Incentives to Settle," MPRA Paper 59424, University Library of Munich, Germany.
    15. Julia Shamir & Noam Shamir, 2021. "Third-party funding in a sequential litigation process," European Journal of Law and Economics, Springer, vol. 52(1), pages 169-202, August.
    16. Schwab, Christian & Tang, Hin-Yue Benny, 2011. "Die Steuerungswirkungen unterschiedlicher Prozesskostenregelungen: Ein Überblick zum Stand von Theorie und Empirie [The economic effects of alternative fee shifting rules: A review of the theoretic," MPRA Paper 32746, University Library of Munich, Germany.
    17. Salvador Barberà & Walter Bossert & Kotaro Suzumura, 2021. "Daunou’s voting rule and the lexicographic assignment of priorities," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 56(2), pages 259-289, February.
    18. Gajdos, Thibault & Maurin, Eric, 2004. "Unequal uncertainties and uncertain inequalities: an axiomatic approach," Journal of Economic Theory, Elsevier, vol. 116(1), pages 93-118, May.
    19. Friehe Tim & Miceli Thomas J., 2017. "A Note on Trial Delay and Social Welfare: The Impact of Multiple Equilibria," Review of Law & Economics, De Gruyter, vol. 13(1), pages 1-15, March.
    20. J.J. Prescott & Kathryn E. Spier & Albert Yoon, 2014. "Trial and Settlement: A Study of High-Low Agreements," NBER Working Papers 19873, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Access to Justice; Social Welfare; Lawsuits; Litigation; Deterrence; Third-Party Litigation Funding; Third-Party Lawyer Lending Industry; Bargaining; Asymmetric Information;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:apc:wpaper:2015-052. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Nelson Ramírez-Rondán (email available below). General contact details of provider: https://edirc.repec.org/data/peruvea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.