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To litigate or not to litigate? The impacts of third-party financing on litigation

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  • Deffains, Bruno
  • Desrieux, Claudine

Abstract

In this paper, we analyze three different ways to finance litigation, namely (i) self-finance by plaintiffs, (ii) contingent fees arrangements and (iii) third-party financing. We show how they impact the access to justice, and the decision to settle or to go to court, when claims can be meritorious or frivolous. Our results show that third-party financing does not always increase the access to justice for a plaintiff, and may even decrease the equilibrium settlement amount. It also increases the number of frivolous claims.

Suggested Citation

  • Deffains, Bruno & Desrieux, Claudine, 2015. "To litigate or not to litigate? The impacts of third-party financing on litigation," International Review of Law and Economics, Elsevier, vol. 43(C), pages 178-189.
    • Handle: RePEc:eee:irlaec:v:43:y:2015:i:c:p:178-189
    DOI: 10.1016/j.irle.2014.08.005
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    Cited by:

    1. Landeo, Claudia M. & Nikitin, Maxim, 2018. "Financially-constrained lawyers: An economic theory of legal disputes," Games and Economic Behavior, Elsevier, vol. 109(C), pages 625-647.
    2. Yun-chien Chang & Su-hao Tu, 2020. "Two-way selection between flat-fee attorneys and litigants: theoretical and empirical analyses," European Journal of Law and Economics, Springer, vol. 49(1), pages 131-164, February.
    3. 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

    Third-party financing; Litigation financing; Frivolous claims; Transaction costs;
    All these keywords.

    JEL classification:

    • K0 - Law and Economics - - General
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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