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Contingent Fees, Signaling and Settlement Authority
-
Shmuel Leshem
Veröffentlicht/Copyright:
29. Juni 2009
Conventional wisdom suggests that under contingent fee contracts, attorneys have an excessive incentive to settle the case; therefore, a plaintiff should retain the authority over settlement decisions. We show, by contrast, that when the plaintiff possesses private information about the outcome of a trial and makes a take-it-or-leave-it settlement demand, delegating settlement authority to an attorney under a contingent fee contract increases the probability of settlement and the plaintiff’s equilibrium payoff. We also show that contingent fee contracts with attorney control over settlement are more efficient than hourly fee contracts, as the former involve a higher probability of settlement. The intuition behind these results is that the attorney’s greater reluctance to go to trial allows him to more effectively signal the plaintiff’s type through the settlement demand.
Published Online: 2009-6-29
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Artikel in diesem Heft
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- Macroeconomic Instability and Corporate Failure: The Role of the Legal System
- Prevention of Crime and the Optimal Standard of Proof in Criminal Law
- Does a Rise in Maximal Fines Increase or Decrease the Optimal Level of Deterrence?
- Benchmarks and Economic Analysis
- Pass a Law, Any Law, Fast! State Legislative Responses to the Kelo Backlash
- The Problem of Shared Social Cost
- A Cost of Tax Planning
- Never Two Without Three: Commons, Anticommons and Semicommons
- Unavoidable Accident
- Protecting Private Property with Constitutional Judicial Review: A Social Welfare Approach
- Measuring Criminal Spillovers: Evidence from Three Strikes
- Corruption on the Court: The Causes and Social Consequences of Point-Shaving in NCAA Basketball
- Valuation of Quality of Life Losses Associated with Nonfatal Injury: Insights from Jury Verdict Data
- Belief in a Just World, Blaming the Victim, and Hate Crime Statutes
- Do Citizens Know Whether Their State Has Decriminalized Marijuana? Assessing the Perceptual Component of Deterrence Theory
- The Structure of Incremental Liability Rules
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