Working Paper BETA #2018-40

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Title : On plaintiff preferences regarding methods of compensating lawyers

Author(s) : Tim Friehe, Yannick Gabuthy

Abstract : This paper analyzes a litigation contest in which the plaintiff’s lawyer and the defendant choose effort. The plaintiff selects the relative importance of a contract component related to the judgment (similar to contingent fees) and a component related to the lawyer’s efforts (similar to conditional fees) to ensure lawyer participation and guide the lawyer’s decision-making. For our setup, we find that the plaintiff considers the component related to the lawyer’s effort to be the relatively more desirable instrument in the light of its effort-inducing and cost characteristics. However, high levels of the lawyer’s outside utility may limit the role of this component.

Key-words : Litigation; Agency; Contest; Compensation

JEL Classification : K41