Fee-Shifting Rules in Litigation With Contingency Fees

38 Pages Posted: 1 Mar 2006

See all articles by Kong-Pin Chen

Kong-Pin Chen

Academia Sinica - Research Center for Humanities and Social Sciences; National Taiwan University - Department of Economics

Jue-Shyan Wang

National Chengchi University

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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

Chen, Kong-Pin and Wang, Jue-Shyan, Fee-Shifting Rules in Litigation With Contingency Fees. Journal of Law, Economics and Organization, Vol.23, pp.519-46, 2007. Available at SSRN: https://ssrn.com/abstract=798064

Kong-Pin Chen (Contact Author)

Academia Sinica - Research Center for Humanities and Social Sciences ( email )

RCHSS
Academia Sinica
Nankang, Taipei, 11529
Taiwan
886 2 2789 8160 (Phone)
886 2 2785 4160 (Fax)

HOME PAGE: http://idv.sinica.edu.tw/kongpin/

National Taiwan University - Department of Economics

21 Hsiu Chow Rd
Taipei, 10020
Taiwan

Jue-Shyan Wang

National Chengchi University ( email )

No. 64, Chih-Nan Road
Section 2
Wenshan, Taipei 11623
Taiwan

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