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Lawyers as Agents of the Devil in a Prisoner's Dilemma Game

  • Orley Ashenfelter

    (Princeton University)

  • David E. Bloom

    (Harvard University)

  • Gordon B. Dahl

    (University of California, San Diego)

Do the parties in a typical dispute face incentives similar to those in the classic prisoner’s dilemma game? In this paper, we explore whether the costs and benefits of legal representation are such that each party seeks legal representation in the hope of exploiting the other party, while knowing full well that failing to do so will open up the possibility of being exploited. The paper first shows how it is possible to test for the presence of such an incentive structure in a typical dispute resolution system. It then reports estimates of the incentives for the parties to obtain legal representation in wage disputes that were settled by final-offer arbitration in New Jersey. The paper also reports briefly on similar studies of data from discharge grievances, courtannexed disputes in Pittsburgh, and child custody disputes in California. In each case, the data provide evidence that the parties face strong individual incentives to obtain legal representation which makes the parties jointly worse off. Using our New Jersey data, we find that expert agents may well have played a productive role in moderating the biases of their clients, but only early on in the history of the system. Over time, the parties slowly evolved to a non-cooperative equilibrium where the use of lawyers becomes nearly universal, despite the fact that agreeing not to hire lawyers is cheaper and does not appear to alter arbitration outcomes.

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Paper provided by Princeton University, Department of Economics, Industrial Relations Section. in its series Working Papers with number 1451.

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Date of creation: Apr 2013
Date of revision:
Handle: RePEc:pri:indrel:574
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  1. Farber, Henry S & Bazerman, Max H, 1986. "The General Basis of Arbitrator Behavior: An Empirical Analysis of Conventional and Final-Offer Arbitration," Econometrica, Econometric Society, vol. 54(6), pages 1503-28, November.
  2. Kevin M. Murphy & Andrei Shleifer & Robert W. Vishny, 1990. "The Allocation of Talent: Implications for Growth," NBER Working Papers 3530, National Bureau of Economic Research, Inc.
  3. Kiefer, Nicholas M., 1978. "Federally subsidized occupational training and the employment and earnings of male trainees," Journal of Econometrics, Elsevier, vol. 8(1), pages 111-125, August.
  4. Richard N. Block & Jack Stieber, 1987. "The impact of attorneys and arbitrators on arbitration awards," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 40(4), pages 543-555, July.
  5. Orley Ashenfelter, 1987. "Arbitrator Behavior," Working Papers 599, Princeton University, Department of Economics, Industrial Relations Section..
  6. Charles F. Adams Jr. & Robert F. Cook & Arthur J. Maurice, 1983. "A Pooled Time-Series Analysis of the Job-Creation Impact of Public Service Employment Grants to Large Cities," Journal of Human Resources, University of Wisconsin Press, vol. 18(2), pages 283-294.
  7. David E. Bloom, 1986. "Empirical Models of Arbitrator Behavior Under Conventional Arbitration," NBER Working Papers 1841, National Bureau of Economic Research, Inc.
  8. Orley Ashenfelter & David E. Bloom, 1983. "Models of Arbitrator Behavior: Theory and Evidence," NBER Working Papers 1149, National Bureau of Economic Research, Inc.
  9. Farber, Henry S & Bazerman, Max H, 1986. "The General Basis of Arbitrator Behavior: An Empirical Analysis of Conventional and Final-Offer Arbitration," Econometrica, Econometric Society, vol. 54(4), pages 819-44, July.
  10. William M. Landes & Richard A. Posner, 1978. "Adjudication as a Private Good," NBER Working Papers 0263, National Bureau of Economic Research, Inc.
  11. LaLonde, Robert J, 1986. "Evaluating the Econometric Evaluations of Training Programs with Experimental Data," American Economic Review, American Economic Association, vol. 76(4), pages 604-20, September.
  12. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-26, November.
  13. Ashenfelter, Orley C, 1978. "Estimating the Effect of Training Programs on Earnings," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 47-57, February.
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