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The Influence of Lawyers and Fee Arrangements on Arbitration

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  • Nathalie Chappe
  • Yannick Gabuthy

Abstract

This paper proposes a theoretical analysis of final-offer arbitration in which disputants may be represented by lawyers who can be paid by flat, contingent, or conditional fees. We derive the equilibrium lawyers' efforts to defend their clients and the equilibrium parties' proposals made to the arbitrator, and evaluate each payment mechanism's performance according to its ability to enhance effort and to promote convergence between the disputants' claims. Following these criteria, the contingent payment structure is shown to be the best regime, since it improves the client-lawyer relationship by enhancing the lawyer's incentives to provide effort, without altering the gap between the parties' positions in arbitration.

Suggested Citation

  • Nathalie Chappe & Yannick Gabuthy, 2013. "The Influence of Lawyers and Fee Arrangements on Arbitration," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 169(4), pages 720-738, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201312)169:4_720:tiolaf_2.0.tx_2-j
    DOI: 10.1628/093245613X13795082136101
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    References listed on IDEAS

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    1. Richard N. Block & Jack Stieber, 1987. "The Impact of Attorneys and Arbitrators on Arbitration Awards," ILR Review, Cornell University, ILR School, vol. 40(4), pages 543-555, July.
    2. Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-1433, November.
    3. John D. Burger & Stephen J.K. Walters, 2005. "Arbitrator Bias and Self-Interest: Lessons from the Baseball Labor Market," Journal of Labor Research, Transaction Publishers, vol. 26(2), pages 267-280, January.
    4. Jue-Shyan Wang, 2007. "Fee-Shifting Rules in Litigation with Contingency Fees," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 519-546, October.
    5. Baik, Kyung Hwan & Kim, In-Gyu, 2007. "Contingent fees versus legal expenses insurance," International Review of Law and Economics, Elsevier, vol. 27(3), pages 351-361, September.
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    More about this item

    JEL classification:

    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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