Playing it Safe with Low Conditional Fees Versus Being Insured by High Contingent Fees

17 Pages Posted: 17 Dec 2004

See all articles by Winand Emons

Winand Emons

University of Bern - Department of Economics; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2005

Abstract

Under contingent fees the attorney gets a share of the judgment; under conditional fees he gets an upscale premium if the case is won which is, however, unrelated to the adjudicated amount. We compare conditional and contingent fees in a framework where lawyers choose between a safe and a risky litigation strategy. Under conditional fees lawyers prefer the safe strategy, under contingent fees the risky one. Risk-averse plaintiffs prefer conditional fees over contingent fees when lawyering costs are low and vice versa for high lawyering costs.

Keywords: Contingent fees,conditional fees, risk aversion, insurance, incentives

JEL Classification: D82, K1

Suggested Citation

Emons, Winand, Playing it Safe with Low Conditional Fees Versus Being Insured by High Contingent Fees (December 2005). Available at SSRN: https://ssrn.com/abstract=633021 or http://dx.doi.org/10.2139/ssrn.633021

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Centre for Economic Policy Research (CEPR)

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