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Strategic Decisions on Lawyers' Compensations in Civil Disputes

Author

Listed:
  • In-Gyu Kim
  • Kyung Hwan Baik

Abstract

We study a model of civil dispute with delegation in which a plaintiff's lawyer works on a contingent fee basis but a defendant's lawyer on an hourly fee basis. We first derive the conditions under which delegation to the lawyers brings both the plaintiff and defendant more payoffs, compared to the case of no delegation. We then show: (i) one third of the award as a contingent fee is strategically determined and indeed an equilibrium outcome; (ii) delegation reduces the total legal expenditures; (iii) the plaintiff wants to stick with the contingent fee scheme as long as the defendant chooses the hourly fee scheme; (iv) the plaintiff prefers the American practice of contingent fees to the European practice with legal cost insurance where contingent fees are absent; and (v) the American practice usually incurs less legal expenditures than the European one.

Suggested Citation

  • In-Gyu Kim & Kyung Hwan Baik, 2004. "Strategic Decisions on Lawyers' Compensations in Civil Disputes," Econometric Society 2004 Far Eastern Meetings 566, Econometric Society.
    • Handle: RePEc:ecm:feam04:566
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    2. Emons, Winand & Fluet, Claude, 2016. "Why plaintiffs’ attorneys use contingent and defense attorneys fixed fee contracts," International Review of Law and Economics, Elsevier, vol. 47(C), pages 16-23.
    3. Sung-Hoon Park, 2022. "Contingent fees and endogenous timing in litigation contests," European Journal of Law and Economics, Springer, vol. 54(3), pages 453-473, December.
    4. Rosa Ferrer, 2015. "The Effect of Lawyers' Career Concerns on Litigation," Working Papers 844, Barcelona School of Economics.
    5. Elie Appelbaum & Eliakim Katz, 2008. "Seeking Rents by Setting Rents: The Political Economy of Rent Seeking," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 555-569, Springer.
    6. Tim Friehe, 2011. "On being asset-constrained in litigation contests," Public Choice, Springer, vol. 147(3), pages 277-284, June.
    7. Friehe, Tim, 2010. "Contingent fees and legal expenses insurance: Comparison for varying defendant fault," International Review of Law and Economics, Elsevier, vol. 30(4), pages 283-290, December.
    8. Friehe, Tim & Pham, Cat Lam & Xemaire, Simon, 2024. "On the strategic choice of overconfident lawyers," International Review of Law and Economics, Elsevier, vol. 80(C).
    9. Baharad, Roy & Cohen, Chen & Nitzan, Shmuel, 2022. "Litigation with adversarial efforts," International Review of Law and Economics, Elsevier, vol. 69(C).
    10. Florian Baumann & Tim Friehe, 2012. "Contingent fees meet the British rule: an exploratory study," Public Choice, Springer, vol. 150(3), pages 499-510, March.
    11. Florian Baumann & Tim Friehe, 2012. "Emotions in litigation contests," Economics of Governance, Springer, vol. 13(3), pages 195-215, September.
    12. Sung-Hoon Park & Jason F. Shogren, 2025. "Nonmarket Valuation by Contests Under Two American Rules: A Game-Theoretic Analysis," Games, MDPI, vol. 16(4), pages 1-13, June.
    13. Liqun Liu & Andrew Rettenmaier & Thomas Saving, 2009. "Conditional payments and self-protection," Journal of Risk and Uncertainty, Springer, vol. 38(2), pages 159-172, April.
    14. Park Sung-Hoon & Lee Sanghack, 2019. "How Do Risk-Averse Litigants Set Contingent Fees for Risk-Neutral Lawyers?," Review of Law & Economics, De Gruyter, vol. 15(2), pages 1-19, July.
    15. Florian Baumann & Tim Friehe, 2013. "A note on the timing of investments in litigation contests," European Journal of Law and Economics, Springer, vol. 35(3), pages 313-326, June.

    More about this item

    Keywords

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    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • K13 - Law and Economics - - Basic Areas of Law - - - Tort Law and Product Liability; Forensic Economics
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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