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Legal effort and optimal legal expenses insurance

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  • Qiao, Yue

Abstract

In this paper we derive optimal legal expenses insurance for litigants and payment method for lawyers when neither the litigant's quantity choice nor the lawyer's legal effort is contractible. Three points are highlighted as our conclusions. First, to design an optimal insurance-payment system, demand-side cost-sharing is necessary. Second, supply-side cost-sharing is necessary only if the quantity and effort are substitutes and the payment contract involves hourly fees. Third, the optimal insurance-payment system could be achieved under conditional fees and sliding fees. Reputation incentives and side-contracts are also discussed in this paper.

Suggested Citation

  • Qiao, Yue, 2013. "Legal effort and optimal legal expenses insurance," Economic Modelling, Elsevier, vol. 32(C), pages 179-189.
    • Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:179-189
    DOI: 10.1016/j.econmod.2013.02.003
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    References listed on IDEAS

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    Cited by:

    1. Julia Shamir & Noam Shamir, 2021. "Third-party funding in a sequential litigation process," European Journal of Law and Economics, Springer, vol. 52(1), pages 169-202, August.

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    More about this item

    Keywords

    Insurance; Moral hazard; Legal effort; Conditional fee; Optimal contracts;
    All these keywords.

    JEL classification:

    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies

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