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Bargaining through an Expert Attorney

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  • Watts, Alison

Abstract

The following is a three-player litigation model. Previous litigation models analyze the litigation process as a two-player strategic game of incomplete information, where equilibrium usually involves a positive probability of trial. These litigation models assume the attorney and her client have the same objectives. However, an attorney paid by contingency fee may want to settle a case, even when it is not advantageous to her client, in order to avoid the cost of preparing for trial. In this paper, the plaintiff and attorney, paid by contingency fee, act as a principal and agent who are bargaining with another principal, the defendant. The attorney is able to learn part of the defendant's private information, at a lower cost than the plaintiff could. Supported by previous empirical studies, I find that as the stakes of the case rise, the range of contingency fees mutually advantageous for plaintiff and attorney falls. Copyright 1994 by Oxford University Press.

Suggested Citation

  • Watts, Alison, 1994. "Bargaining through an Expert Attorney," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 10(1), pages 168-186, April.
    • Handle: RePEc:oup:jleorg:v:10:y:1994:i:1:p:168-86
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    Citations

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    Cited by:

    1. Leshem Shmuel, 2009. "Contingent Fees, Signaling and Settlement Authority," Review of Law & Economics, De Gruyter, vol. 5(1), pages 435-460, June.
    2. Baumann, Florian & Friehe, Tim, 2014. "On discovery, restricting lawyers, and the settlement rate," DICE Discussion Papers 155, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. 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.
    4. Amy Farmer & Paul Pecorino, 2013. "Discovery and Disclosure with Asymmetric Information and Endogenous Expenditure at Trial," The Journal of Legal Studies, University of Chicago Press, vol. 42(1), pages 223-247.
    5. Zhou, J., 2010. "Access to justice : An economic approach," Other publications TiSEM 9d70f451-35c4-4878-92bf-7, Tilburg University, School of Economics and Management.
    6. Amy Farmer & Paul Pecorino, 2005. "Civil Litigation with Mandatory Discovery and Voluntary Transmission of Private Information," The Journal of Legal Studies, University of Chicago Press, vol. 34(1), pages 137-159, January.
    7. Jeff Yates & Damon M. Cann & Brent D. Boyea, 2013. "Judicial Ideology and the Selection of Disputes for U.S. Supreme Court Adjudication," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(4), pages 847-865, December.
    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. Farmer, Amy & Pecorino, Paul, 2022. "Discovery in a screening model of final offer arbitration," International Review of Law and Economics, Elsevier, vol. 69(C).
    10. Frank H. Stephen, 2013. "Lawyers, Markets and Regulation," Books, Edward Elgar Publishing, number 14803.
    11. Ayouni, Mehdi & Friehe, Tim & Gabuthy, Yannick, 2024. "Bayesian persuasion in lawyer–client communication," International Review of Law and Economics, Elsevier, vol. 78(C).
    12. Spier, Kathryn E. & Sykes, Alan O., 1998. "Capital structure, priority rules, and the settlement of civil claims," International Review of Law and Economics, Elsevier, vol. 18(2), pages 187-200, June.
    13. Amy Fanner & Paul Pecorino, 2005. "Dispute Rates and Contingency Fees: An Analysis from the Signaling Model," Southern Economic Journal, John Wiley & Sons, vol. 71(3), pages 566-581, January.
    14. Andrew F. Daughety & Reinganum F. Reinganum, 2014. "Settlement and Trial: Selected Analyses of the Bargaining Environment," Vanderbilt University Department of Economics Working Papers 14-00005, Vanderbilt University Department of Economics.
    15. Farmer, Amy & Pecorino, Paul, 2017. "Litigation with judgment proof defendants," International Review of Law and Economics, Elsevier, vol. 49(C), pages 1-9.
    16. Douglas Cumming, 2001. "Settlement Disputes: Evidence from a Legal Practice Perspective," European Journal of Law and Economics, Springer, vol. 11(3), pages 249-280, May.
    17. Hyde, Charles E., 2006. "Conditional versus contingent fees: Litigation expenditure incentives," International Review of Law and Economics, Elsevier, vol. 26(2), pages 180-194, June.
    18. Arzu Kıbrıs, 2012. "Uncertainty and ratification failure," Public Choice, Springer, vol. 150(3), pages 439-467, March.
    19. Farmer, Amy & Pecorino, Paul, 2020. "Disclosure and Discovery with fairness," International Review of Law and Economics, Elsevier, vol. 62(C).

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