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What Clients want: Choices between Lawyers' Offerings

Listed author(s):
  • Flora Felso

    (Netherlands Bureau for Economic Policy Analysis (CPB), the Netherlands)

  • Sander Onderstal

    (University of Amsterdam)

  • Jo Seldeslachts

    (University of Amsterdam)

We analyze a client's choice of contract in auctions where Dutch law firms compete for routine cases. The distinguishing feature here is that lawyers may submit bids with any fee arrangement they prefer: an hourly rate, a fixed fee or a mixed fee, which is a time-capped fixed fee plus an hourly rate for any additional hours should the case take longer than expected. Furthermore, this format of selling legal services is unusual in that it both forces lawyers to compete directly against each other and allows clients to easily compare these different offers. We empirically estimate a choice model for clients and find robust evidence that hourly rate bids are a client's least-preferred choice. Our findings tentatively contradict lawyers' often made argument that hourly rates are in a client's best interest.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 14-020/VII.

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Date of creation: 10 Feb 2014
Handle: RePEc:tin:wpaper:20140020
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  1. White,Halbert, 1996. "Estimation, Inference and Specification Analysis," Cambridge Books, Cambridge University Press, number 9780521574464, September.
  2. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  3. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, Elsevier.
  4. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387, August.
  5. Maheshri, Vikram & Winston, Clifford, 2014. "An exploratory study of the pricing of legal services," International Review of Law and Economics, Elsevier, vol. 38(S), pages 169-173.
  6. J. Scott Long & Jeremy Freese, 2006. "Regression Models for Categorical Dependent Variables using Stata, 2nd Edition," Stata Press books, StataCorp LP, edition 2, number long2, January.
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