Making Lawyers Compete
7 Pages Posted: 25 Jul 2004
The market for tort-claiming services is not price competitive. Indicators of an uncompetitive market include uniform pricing unjustified by considerations of efficiency or reduction in agency costs, price inelasticity in the face of highly variable production costs and rewards, the level of increase over the past 40 years in the inflation-adjusted effective hourly rate realized by tort lawyers, and the historical derivation of the standard contingent fee. The results of this non-competitive market are as we would expect: Over the past 40 years, the average effective hourly rate of the contingent-fee bar has increased, in inflation-adjusted dollars, by between 1,000 and 1,400 percent. Moreover, the top quartile of the torts bar obtains effective rates of thousands of dollars an hour. I estimate that tort fees total $22 billion annually; others estimate the total as high as $40 billion.
Keywords: Tort law, torts, tort litigation, contigent fee-financed litigation, litigation, competition, price advertising, contigent fees, tort liability, price competition
JEL Classification: K13, K40
Suggested Citation: Suggested Citation