Fee-Shifting Rules in Litigation with Contingency Fees

Chen, Kong-Pin; Wang, Jue-Shyan

doi:10.2139/ssrn.798044

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Fee-Shifting Rules in Litigation with Contingency Fees

38 Pages Posted: 12 Sep 2005

See all articles by Kong-Pin Chen

Kong-Pin Chen

Institute of Economics, Academia Sinica; National Taiwan University - Department of Economics

Jue-Shyan Wang

National Chengchi University

There are 3 versions of this paper

Date Written: August 30, 2005

Abstract

This paper theoretically compares the British and American fee-shifting rules in their influences on the behavior of the litigants and the outcomes of litigation. We build up a comprehensive litigation model with asymmetric information and agency costs, and solve for the equilibria under both American and British rules. We thereby compare their equilibrium settlement amounts and rates, expenditures incurred in trials, as well as the plaintiff's chances of winning and incentive to sue. The theoretical results are broadly consistent with existing empirical evidence.

Keywords: fee-shifting rules, contingency fees, British rules, American rules, agency cost, bargaining

JEL Classification: D74, D82, K41

Suggested Citation: Suggested Citation

Chen, Kong-Pin and Wang, Jue-Shyan, Fee-Shifting Rules in Litigation with Contingency Fees (August 30, 2005). Available at SSRN: https://ssrn.com/abstract=798044 or http://dx.doi.org/10.2139/ssrn.798044