Lawyers as Agents of the Devil in a Prisoner's Dilemma Game

25 Pages Posted: 20 Aug 2013

See all articles by Orley Ashenfelter

Orley Ashenfelter

Princeton University - Industrial Relations Section; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

David E. Bloom

Harvard University - T.H. Chan School of Public Health; National Bureau of Economic Research (NBER)

Gordon B. Dahl

UC San Diego - Department of Economics; National Bureau of Economic Research (NBER); University of Rochester - Department of Economics

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Date Written: September 2013

Abstract

Do the parties in a typical dispute face incentives similar to those in the classic prisoner's dilemma game? In this article, we explore whether the costs and benefits of legal representation are such that each party seeks legal representation in the hope of exploiting the other party, while knowing full well that failing to do so will open up the possibility of being exploited. The article first shows how it is possible to test for the presence of such an incentive structure in a typical dispute resolution system. It then reports estimates of the incentives for the parties to obtain legal representation in wage disputes that were settled by final‐offer arbitration in New Jersey. The article also reports briefly on similar studies of data from discharge grievances, court‐annexed disputes in Pittsburgh, and child custody disputes in California. In each case, the data provide evidence that the parties face strong individual incentives to obtain legal representation that make the parties jointly worse off. Using our New Jersey data, we find that expert agents may well have played a productive role in moderating the biases of their clients, but only early on in the history of the system. Over time, the parties slowly evolved to a noncooperative equilibrium where the use of lawyers becomes nearly universal, despite the fact that agreeing not to hire lawyers is cheaper and does not appear to alter arbitration outcomes.

Suggested Citation

Ashenfelter, Orley C. and Bloom, David E. and Dahl, Gordon B., Lawyers as Agents of the Devil in a Prisoner's Dilemma Game (September 2013). Journal of Empirical Legal Studies, Vol. 10, Issue 3, pp. 399-423, 2013. Available at SSRN: https://ssrn.com/abstract=2312968 or http://dx.doi.org/10.1111/jels.12014

Orley C. Ashenfelter (Contact Author)

Princeton University - Industrial Relations Section ( email )

Princeton, NJ 08544-2098
United States
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National Bureau of Economic Research (NBER)

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David E. Bloom

Harvard University - T.H. Chan School of Public Health ( email )

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National Bureau of Economic Research (NBER)

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Gordon B. Dahl

UC San Diego - Department of Economics ( email )

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United States

National Bureau of Economic Research (NBER)

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United States

University of Rochester - Department of Economics ( email )

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United States

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