DP1487 Expertise, Contingent Fees, and Excessive Litigation

Author(s): Winand Emons
Publication Date: October 1996
Keyword(s): Contingent Fees, Expert Services, Incentives, Litigation
JEL(s): D82, K41
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1487

Plaintiffs have either strong or weak cases. Both cases should be taken to court, yet weak cases need more work by the attorney than strong cases. Only the attorney knows whether a case needs additional work or not; the plaintiff is forced to rely on the attorney?s recommendation. We show that under contingent fees there will generally be excessive litigation. In contrast, an hourly fee implements the efficient amount of litigation.