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Legal Fees, Cost-Shifting Rules and Litigation: Experimental Evidence

Yannick Gabuthy (), Emmanuel Peterle () and Jean-Christian Tisserand
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Yannick Gabuthy: BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: In this paper, we conduct an experiment in order to explore how the legal fee arrangement (i.e. flat or contingent fees) and the trial costs allocation rule (i.e. American or English rule) may shape the efficiency of the litigation process, via their effect on the lawyer's effort, the deterrence of frivolous lawsuits and the plaintiff's incentives to go to court. In our experimental context, it is shown that the combination of contingent fees and English rule is the best setting in terms of effort incentives, but enhances frivolous lawsuits. This result may indicate potentially that the recent tendency observed in European countries to combine contingency and English rule would be desirable only if it is associated to mechanisms discouraging plaintiffs to sue meritless cases.

Keywords: Litigation; Fee-shifting rules; Fee arrangements; Experiments (search for similar items in EconPapers)
Date: 2021-04
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Published in Journal of Behavioral and Experimental Economics, 2021, 93, pp.18. ⟨10.1016/j.socec.2021.101705⟩

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DOI: 10.1016/j.socec.2021.101705

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