Contingent Fees and Agency Costs

Bruce L Hay

The Journal of Legal Studies, 1996, vol. 25, issue 2, 503-33

Abstract: In this article, I examine the operation of ordinary linear contingent fees in a model of litigation in which the recovery on a claim is a function of the lawyer's efforts. My object here is to analyze the linear fee that maximizes the client's welfare in the presence of attorney moral hazard. I identify the optimal fee as the one that minimizes two agency costs: underinvestment in the claim, and attorney rents. I also attempt to identify how the optimal linear fee varies with different case characteristics. Copyright 1996 by the University of Chicago.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jlstud:v:25:y:1996:i:2:p:503-33

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