In Defense of Lawyers. Moral Hazard as an Aid to Cooperation
This paper studies strategic delegation in two-player contests for an indivisible prize (as in, e.g. litigation) where one party's probability of winning is determined by the relative investments of both. Even though neither player stands to gain anything from the possibility of one player committing himself to an investment level, both players ex ante prefer compulsory representation by agents (e.g. lawyers) whose efforts are unobservable. Thus this paper points out a role for delegation with moral hazard in facilitating cooperation.
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|Date of creation:||Sep 1996|
|Date of revision:|
|Publication status:||Published in Games and Economic Behavior, 2000, pages 145-158.|
|Contact details of provider:|| Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden|
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