Rent-Seeking and Litigation: The Hidden Virtues of Limited Fee Shifting

Carbonara Emanuela (), Francesco Parisi and Georg von Wangenheim ()
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Carbonara Emanuela: Department of Economics, University of Bologna, Bologna, Italy
Georg von Wangenheim: Fachbereich Wirtschaftswissenschaften, Universität Kassel, Kassel, Germany

Review of Law & Economics, 2015, vol. 11, issue 2, 113-148

Abstract: In the past couple of decades, scholars have predominantly employed rent-seeking models to analyze litigation problems. In this paper, we build on the existing literature to show how alternative fee-shifting arrangements (e.g., the American rule and English rule with limited fee-shifting) affect parties’ litigation expenditures and their decisions to litigate. Contrary to the prevailing wisdom, we discover that, when fee shifting is limited, the English rule presents some interrelated advantages over the American rule, including the reduction of litigation rates and the possible reduction of expected litigation expenditures. Our results unveil a hidden virtue of limited fee shifting, showing that an increase in such limit may lead to a desirable sorting of socially valuable litigation.

Keywords: litigation; limited fee-shifting; rent-seeking; English rule; American rule (search for similar items in EconPapers)
JEL-codes: C72 D72 K41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (15)

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DOI: 10.1515/rle-2015-0027

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