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What clients want: Choices between lawyers' offerings

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  • Flóra Felső
  • Sander Onderstal
  • Jo Seldeslachts

Abstract

We analyze a client's choice of contract in auctions where Dutch law firms compete for cases. The distinguishing feature is that lawyers may submit bids with any fee arrangement they prefer: an hourly rate, a fixed fee or a "mixed fee", which is a time-capped fixed fee plus an hourly rate for any additional hours should the case take longer than expected. This format of selling legal services is unusual in that it both forces lawyers to compete directly against each other and allows clients to easily compare these dierent oers. We estimate a choice model for clients and find robust evidence that hourly rate bids are a client's least-preferred choice. Our findings tentatively contradict lawyers' often made argument that hourly rates are in a client's best interest.

Suggested Citation

  • Flóra Felső & Sander Onderstal & Jo Seldeslachts, 2015. "What clients want: Choices between lawyers' offerings," Working Papers of Department of Management, Strategy and Innovation, Leuven 486733, KU Leuven, Faculty of Economics and Business (FEB), Department of Management, Strategy and Innovation, Leuven.
    • Handle: RePEc:ete:msiper:486733
    Note: paper number MSI_1504
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    References listed on IDEAS

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    1. Farrell, Joseph & Klemperer, Paul, 2007. "Coordination and Lock-In: Competition with Switching Costs and Network Effects," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 31, pages 1967-2072, Elsevier.
    2. Ewerhart, Christian & Fieseler, Karsten, 2003. "Procurement Auctions and Unit-Price Contracts," RAND Journal of Economics, The RAND Corporation, vol. 34(3), pages 569-581, Autumn.
    3. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, October.
    4. White,Halbert, 1996. "Estimation, Inference and Specification Analysis," Cambridge Books, Cambridge University Press, number 9780521574464, October.
    5. J. Scott Long & Jeremy Freese, 2006. "Regression Models for Categorical Dependent Variables using Stata, 2nd Edition," Stata Press books, StataCorp LP, edition 2, number long2, March.
    6. Dana, James D, Jr & Spier, Kathryn E, 1993. "Expertise and Contingent Fees: The Role of Asymmetric Information in Attorney Compensation," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 9(2), pages 349-367, October.
    7. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
    8. Maheshri, Vikram & Winston, Clifford, 2014. "An exploratory study of the pricing of legal services," International Review of Law and Economics, Elsevier, vol. 38(S), pages 169-173.
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    Cited by:

    1. Flóra Felső & Sander Onderstal & Jo Seldeslachts, 2022. "The Pricing Structure of Legal Services: Do Lawyers Offer What Clients Want?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 61(2), pages 123-148, September.

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    More about this item

    Keywords

    Lawyers' fee arrangements; clients' choices; discrete choice models;
    All these keywords.

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • K10 - Law and Economics - - Basic Areas of Law - - - General (Constitutional Law)
    • K40 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - General

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