Working Paper: CEPR ID: DP4532
Authors: Winand Emons
Abstract: Under contingent fees the attorney gets a share of the judgement; under conditional fees the lawyer gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a framework where lawyers are uninformed about the clients? cases. If there is asymmetric information about the merits of cases, in equilibrium attorneys will offer only conditional fees. If there is asymmetric information about the risk of cases, only contingent fee contracts are offered in equilibrium.
Keywords: adverse selection; conditional fees; contingent fees; moral hazard; pooling; screening
JEL Codes: D82; K10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Asymmetric information about the merits of cases (D82) | Conditional fee contracts (K12) |
| Asymmetric information concerning the risk of cases (D82) | Contingent fee contracts (K12) |