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On the strategic choice of overconfident lawyers

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  • Friehe, Tim
  • Pham, Cat Lam
  • Xemaire, Simon

Abstract

This paper analyzes how the plaintiff selects her lawyer based on lawyers’ confidence in their trial-effort productivity. The plaintiff’s lawyer works on a contingent fee and makes litigation decisions on the plaintiff’s behalf. When the lawyer’s preferences are decisive at both the settlement and the trial stage, the plaintiff must anticipate that a more confident lawyer evaluates settlement compared to trial differently and implies different equilibrium trial effort levels. When the lawyer implements the plaintiff’s ideal settlement demand, only the influence of the confidence level on trial effort levels is relevant. In both cases, the plaintiff prefers an overconfident lawyer but would be harmed by excessive overconfidence. In many circumstances, the optimal confidence level maximizes the plaintiff’s trial payoff. However, when the lawyer’s preferences are decisive at both the settlement and trial stage, the plaintiff may choose an even more confident lawyer to raise the settlement level her lawyer demands from the defendant.

Suggested Citation

  • Friehe, Tim & Pham, Cat Lam & Xemaire, Simon, 2024. "On the strategic choice of overconfident lawyers," International Review of Law and Economics, Elsevier, vol. 80(C).
    • Handle: RePEc:eee:irlaec:v:80:y:2024:i:c:s0144818824000516
    DOI: 10.1016/j.irle.2024.106231
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    More about this item

    Keywords

    Litigation; Settlement; Delegation; Overconfidence; Contingent fee;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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