Working Paper: CEPR ID: DP9727
Authors: Winand Emons; Claude Fluet
Abstract: Victims want to collect damages from injurers. Cases differ with respect to the judgment. Attorneys observe the expected judgment, clients do not. Victims need an attorney to sue; defense attorneys reduce the probability that the plaintiff prevails. Plaintiffs' attorneys offer contingent fees providing incentives to proceed with strong and drop weak cases. By contrast, defense attorneys work for fixed fees under which they accept all cases. Since the defense commits to fight all cases, few victims sue in the first place. We thus explain the fact that in the US virtually all plaintiffs use contingency while defendants tend to rely exclusively on fixed fees.
Keywords: contingent fees; expert services; fixed fees; litigation
JEL Codes: D82; K41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| fee structure (contingent fees for plaintiffs and fixed fees for defendants) (K41) | litigation behavior of plaintiffs and defendants (K41) |
| contingent fees incentivize plaintiffs' attorneys to select only strong cases (K41) | lower likelihood of weak cases being pursued (K41) |
| defense attorneys, under fixed fee contracts, accept all cases (K00) | higher probability of plaintiffs prevailing in weak cases (K41) |
| defense's commitment to fight all cases under fixed fee contracts (K41) | deterrent effect on plaintiffs with weak cases (K41) |
| defense attorney's fixed fee contract (K12) | commitment to fight all cases (L49) |
| commitment to fight all cases (L49) | affects plaintiffs' decision-making process regarding which cases to pursue (K41) |