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

16 Pages Posted: 3 May 2005

See all articles by Winand Emons

Winand Emons

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

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Date Written: January 2005

Abstract

Under contingent fees, the attorney gets a share of the judgement; under conditional fees they get 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, K10

Suggested Citation

Emons, Winand, Playing it Safe with Low Conditional Fees Versus Being Insured by High Contingent Fees (January 2005). Available at SSRN: https://ssrn.com/abstract=716163

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University of Bern - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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