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http://hdl.handle.net/1783.1/3230
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| Title: | The optimality of contingent fees in the agency problem of litigation |
| Authors: | Wang, Susheng |
| Keywords: | Litigation
Contingent fees
Agency problem |
| Issue Date: | Mar-2008 |
| Citation: | International Review of Law and Economics. v. 28(1), p. 23-31 |
| Abstract: | Linear contracts are of particular interest to economists. They have a simple structure, yet they are very popular in practice. In this regard, plaintiff-lawyer contractual relationships are of particular interest. Lawyers’ fees are mostly paid by a sharing rule and they are typically a fixed proportion of the recovery across all lawsuits of the same type and this fixed proportion typically stays constant for many years. Such a simple and stable form of contract is puzzling to contract theorists. This paper presents a simple agency model with a risk-averse principal and a risk-neutral agent. We show that the observed puzzling features of contracts in litigation are in fact optimal behaviors if a lawyer’s effort has a constant marginal cost. |
| Rights: | International Review of Law and Economics © copyright (2008) Elsevier. The Journal's web site is located at http://www.sciencedirect.com/ |
| URI: | http://hdl.handle.net/1783.1/3230 |
| Appears in Collections: | ECON Journal/Magazine Articles
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| Litigation12008.pdf | pre-published version | 140Kb | Adobe PDF | View/Open |
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