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Playing It Safe with Low Conditional Fees versus Being Insured by High Contingent Fees

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  • Winand Emons

Abstract

Under contingent fees the attorney gets a share of the judgment; under conditional fees he gets an upscale premium if the case is won, a premium unrelated, however, to the adjudicated amount. This article compares conditional and contingent fees in a framework where lawyers choose between a safe and a risky litigation strategy. Under conditional fees lawyers prefer the safe strategy; under contingent fess, the risky one. Risk-averse plaintiffs prefer conditional fees over contingent fees when lawyering costs are low and vice-versa for high lawyering costs. Copyright 2006, Oxford University Press.

Suggested Citation

  • Winand Emons, 2006. "Playing It Safe with Low Conditional Fees versus Being Insured by High Contingent Fees," American Law and Economics Review, American Law and Economics Association, vol. 8(1), pages 20-32.
    • Handle: RePEc:oup:amlawe:v:8:y:2006:i:1:p:20-32
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    File URL: http://hdl.handle.net/10.1093/aler/ahj002
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    1. Winand Emons, 2007. "Conditional versus contingent fees," Oxford Economic Papers, Oxford University Press, vol. 59(1), pages 89-101, January.
    2. Roland Kirstein & Neil Rickman, 2004. ""Third Party Contingency" Contracts in Settlement and Litigation," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 160(4), pages 555-575, December.
    3. Winand Emons & Nuno Garoupa, 2004. "The Economics of US-style Contingent Fees and UK-style Conditional Fees," Diskussionsschriften dp0407, Universitaet Bern, Departement Volkswirtschaft.
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    Cited by:

    1. Chopard, Bertrand & Cortade, Thomas & Langlais, Eric, 2010. "Trial and settlement negotiations between asymmetrically skilled parties," International Review of Law and Economics, Elsevier, vol. 30(1), pages 18-27, March.
    2. At Christian & Friehe Tim & Gabuthy Yannick, 2019. "On Lawyer Compensation When Appeals Are Possible," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 19(2), pages 1-11, April.
    3. Florian Baumann & Tim Friehe, 2012. "Contingent fees meet the British rule: an exploratory study," Public Choice, Springer, vol. 150(3), pages 499-510, March.
    4. At, Christian & Gabuthy, Yannick, 2015. "Moral hazard and agency relationship in sequential litigation," International Review of Law and Economics, Elsevier, vol. 41(C), pages 86-90.
    5. Bruno Deffains & Eric Langlais, 2011. "Informational externalities and settlements in mass tort litigations," European Journal of Law and Economics, Springer, vol. 32(2), pages 241-262, October.
    6. Deffains, Bruno & Langlais, Eric, 2007. "Informational externalities and informational sharing in class action suits," MPRA Paper 4846, University Library of Munich, Germany.
    7. Yannick Gabuthy & Pierre-Henri Morand, 2019. "Lawyer Fee Arrangements and Litigation Outcomes: An Auction-Theoretic Perspective," Working Papers of BETA 2019-03, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    8. Friehe, Tim & Gabuthy, Yannick & Lambert, Eve-Angéline, 2020. "Settlement implications of lawyer advertising," International Review of Law and Economics, Elsevier, vol. 61(C).
    9. Zamir Eyal & Medina Barak & Segal Uzi, 2014. "Who Benefits from the Uniformity of Contingent Fee Rates?," Review of Law & Economics, De Gruyter, vol. 9(3), pages 357-387, January.
    10. Friehe, Tim, 2010. "Contingent fees and legal expenses insurance: Comparison for varying defendant fault," International Review of Law and Economics, Elsevier, vol. 30(4), pages 283-290, December.

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)

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