Two-Way Selection between Flat-Fee Attorneys and Litigants: Theoretical and Empirical Analyses

50 Pages Posted: 15 Feb 2017 Last revised: 6 Sep 2017

See all articles by Yun-chien Chang

Yun-chien Chang

Academia Sinica - Institutum Iurisprudentiae (IIAS); New York University School of Law

Su-hao Tu

Academia Sinica

Date Written: February 13, 2017

Abstract

Flat (or fixed) attorney fees, despite their popularity, have been rarely studied by theorists and empiricists. This article builds informal theoretical models to describe the incentive schemes of rational attorneys and rational litigants. Rational attorneys who collect flat fees in advance would work sufficiently hard on the cases at hand only to keep their reputation. They would decline representation less frequently than contingent-fee attorneys. Rational litigants would seek representation and select flat-fee attorneys mainly based on how well an attorney can increase the probability of winning. We create three unique survey data sets: one on attorneys with 834 observations; one on litigants with 2705 observations; and one on 1224 randomly selected adults—all in Taiwan. Empirical analyses of these data reveal that flat-fee attorneys in Taiwan turned down about 10% of potential clients, mainly because of low winning rates. Such attorneys attract clients largely based on their reputation. Inexperienced litigants rely on their social network for information and attorney referrals. As litigants gain experience, they are more inclined to focus on factors that are more likely to maximize their net private benefits.

Keywords: Contingent fee, hourly fee, fixed fee, litigation, settlement, attorney referral, survey, Taiwan

JEL Classification: K41

Suggested Citation

Chang, Yun-chien and Tu, Su-hao, Two-Way Selection between Flat-Fee Attorneys and Litigants: Theoretical and Empirical Analyses (February 13, 2017). European Journal of Law and Economics, Forthcoming; Cornell Legal Studies Research Paper No. 17-14. Available at SSRN: https://ssrn.com/abstract=2916219 or http://dx.doi.org/10.2139/ssrn.2916219

Yun-chien Chang (Contact Author)

Academia Sinica - Institutum Iurisprudentiae (IIAS) ( email )

128 Academia Sinica Rd., Sec. 2
Nankang
Taipei City, 11529
Taiwan

New York University School of Law ( email )

40 Washington Square South
New York, NY 10012-1099
United States

Su-hao Tu

Academia Sinica ( email )

Nankang
Taipei, 11529
Taiwan

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