Who Benefits from the Uniformity of Contingent Fee Rates?

Zamir Eyal (), Medina Barak () and Uzi Segal
Additional contact information
Zamir Eyal: Faculty of Law, Hebrew University of Jerusalem, Jerusalem 91905, Israel
Medina Barak: Faculty of Law, Hebrew University of Jerusalem, Jerusalem 91905, Israel

Review of Law & Economics, 2014, vol. 9, issue 3, 357-387

Abstract: Lawyers’ contingent fee (CF) rates are rather uniform, often one-third of the recovery. Arguably, this uniformity is a type of anti-competitive price-fixing, which results in clients paying supra-competitive fees. This paper challenges this argument. It shows that uniform CF rates provide clients with an important advantage, as such rates enable them to make a de facto “take-it-or-leave-it” offer. Consequently, lawyers cannot exploit their private information, and clients retain the transaction’s entire surplus and may hire the best lawyer among those who find it profitable to handle the case.The paper also addresses the effect of uniformity of CF rates when lawyers refer cases to other lawyers. It shows that uniformity facilitates matching of clients and lawyers through the referral system. It also demonstrates that the fact that both direct clients and those obtained through paid-for referrals pay the same CF rate does not attest to cross-subsidization. The clients whose cases are transferred for a referral fee (paid by the handling lawyer) “pay” for the referral service by obtaining a less highly ranked lawyer.

Keywords: contingent fee; lawyers; uniform prices (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/rle-2013-0009 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:9:y:2014:i:3:p:357-387:n:4

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/rle/html

DOI: 10.1515/rle-2013-0009

Access Statistics for this article

Review of Law & Economics is currently edited by Francesco Parisi

More articles in Review of Law & Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().