Jump to ContentJump to Main Navigation
Show Summary Details
More options …

Review of Law & Economics

Editor-in-Chief: Parisi, Francesco / Engel, Christoph

Ed. by Cooter, Robert D. / Gómez Pomar, Fernando / Kornhauser, Lewis A. / Parchomovsky, Gideon / Franzoni, Luigi Alberto

CiteScore 2018: 0.32

SCImago Journal Rank (SJR) 2018: 0.274
Source Normalized Impact per Paper (SNIP) 2018: 0.493

See all formats and pricing
More options …
Volume 5, Issue 1


Contingent Fees, Signaling and Settlement Authority

Shmuel Leshem
Published Online: 2009-06-29 | DOI: https://doi.org/10.2202/1555-5879.1274

Conventional wisdom suggests that under contingent fee contracts, attorneys have an excessive incentive to settle the case; therefore, a plaintiff should retain the authority over settlement decisions. We show, by contrast, that when the plaintiff possesses private information about the outcome of a trial and makes a take-it-or-leave-it settlement demand, delegating settlement authority to an attorney under a contingent fee contract increases the probability of settlement and the plaintiff’s equilibrium payoff. We also show that contingent fee contracts with attorney control over settlement are more efficient than hourly fee contracts, as the former involve a higher probability of settlement. The intuition behind these results is that the attorney’s greater reluctance to go to trial allows him to more effectively signal the plaintiff’s type through the settlement demand.

About the article

Published Online: 2009-06-29

Citation Information: Review of Law & Economics, Volume 5, Issue 1, Pages 435–460, ISSN (Online) 1555-5879, DOI: https://doi.org/10.2202/1555-5879.1274.

Export Citation

©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston.Get Permission

Citing Articles

Here you can find all Crossref-listed publications in which this article is cited. If you would like to receive automatic email messages as soon as this article is cited in other publications, simply activate the “Citation Alert” on the top of this page.

Amy Farmer and Paul Pecorino
SSRN Electronic Journal, 2012
Andrew F. Daughety and Jennifer F. Reinganum
SSRN Electronic Journal, 2014
Shay Lavie and Avraham D. Tabbach
SSRN Electronic Journal , 2017
Siddhartha Bandyopadhyay and Bryan C. McCannon
SSRN Electronic Journal, 2010
Andrew F. Daughety and Jennifer F. Reinganum
SSRN Electronic Journal, 2013
Nobert Osemeke and Louis Osemeke
International Journal of Disclosure and Governance, 2017
Journal of Public Economic Theory, 2015, Volume 17, Number 2, Page 219
Andrew F. Daughety and Jennifer F. Reinganum
American Economic Review, 2014, Volume 104, Number 8, Page 2552

Comments (0)

Please log in or register to comment.
Log in