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Legal Fees, Cost-Shifting Rules and Litigation: Experimental Evidence

Author

Listed:
  • Yannick Gabuthy

    (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Emmanuel Peterle

    (CRESE - Centre de REcherches sur les Stratégies Economiques (UR 3190) - UFC - Université de Franche-Comté - UBFC - Université Bourgogne Franche-Comté [COMUE])

  • Jean-Christian Tisserand

    (BSB - Burgundy School of Business (BSB) - Ecole Supérieure de Commerce de Dijon Bourgogne (ESC))

Abstract

In this paper, we conduct an experiment in order to explore how the legal fee arrangement (i.e. flat or contingent fees) and the trial costs allocation rule (i.e. American or English rule) may shape the efficiency of the litigation process, via their effect on the lawyer's effort, the deterrence of frivolous lawsuits and the plaintiff's incentives to go to court. In our experimental context, it is shown that the combination of contingent fees and English rule is the best setting in terms of effort incentives, but enhances frivolous lawsuits. This result may indicate potentially that the recent tendency observed in European countries to combine contingency and English rule would be desirable only if it is associated to mechanisms discouraging plaintiffs to sue meritless cases.

Suggested Citation

  • Yannick Gabuthy & Emmanuel Peterle & Jean-Christian Tisserand, 2021. "Legal Fees, Cost-Shifting Rules and Litigation: Experimental Evidence," Post-Print hal-03209291, HAL.
    • Handle: RePEc:hal:journl:hal-03209291
    DOI: 10.1016/j.socec.2021.101705
    Note: View the original document on HAL open archive server: https://hal.univ-lorraine.fr/hal-03209291
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    1. Alice Guerra & Maria Maraki & Baptiste Massenot & Christian Thöni, 2023. "Deterrence, settlement, and litigation under adversarial versus inquisitorial systems," Public Choice, Springer, vol. 196(3), pages 331-356, September.

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    More about this item

    Keywords

    Litigation; Fee-shifting rules; Fee arrangements; Experiments;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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