Working Paper: CEPR ID: DP4841
Authors: Winand Emons
Abstract: Under contingent fees the attorney gets a share of the judgement; under conditional fees they get 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 choose between a safe and a risky litigation strategy. Under conditional fees lawyers prefer the safe strategy, under contingent fess the risky one. Risk-averse plaintiffs prefer conditional fees over contingent fees when lawyering costs are low and vice versa for high lawyering costs.
Keywords: conditional fees; contingent fees; incentives; insurance; risk aversion
JEL Codes: D82; K10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conditional fees (K12) | attorney behavior (safe strategy) (K41) |
| attorney behavior (safe strategy) (K41) | probability of winning (C25) |
| contingent fees (J33) | attorney behavior (risky strategy) (K41) |
| attorney behavior (risky strategy) (K41) | expected judgment (Y20) |
| risk-averse plaintiffs (K13) | preference for conditional fees when lawyer costs are low (K41) |
| risk-averse plaintiffs (K13) | preference for contingent fees when costs are high (K41) |