Economic and Psychological Insights into the Process of Claiming and Agreeing Damages and Costs

John Peysner
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John Peysner: University of Lincoln

Chapter 8 in Access to Justice, 2014, pp 79-92 from Palgrave Macmillan

Abstract: Abstract The relationship between client and attorney operating on an hourly fees basis classically exhibits the principal agent problem or dilemma. The client, as principal in the case, must motivate the attorney, who is the agent, to pursue the client’s interests. Hourly fees may not do this, as it is difficult for the client to know how diligently the attorney is working. The attorney may, for example, conduct the case to maximise the hourly fees. This is a case of moral hazard stemming from the hidden nature of the attorney’s action. A classic solution to the principal’s problem in cases where the agent’s actions are hidden but the output may be observed, is to make the agent’s rewards contingent on the level of output. By this reasoning, contingent fees may be seen as a useful device for ensuring that [attorneys] deliver services efficiently.1

Keywords: Legal Service; Base Cost; Litigation Risk; Principal Agent Problem; Unknown Unknown (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-137-39723-2_8

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DOI: 10.1057/9781137397232_8

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