Premium
Search, bargaining, and signalling in the market for legal services
Author(s) -
Daughety Andrew F.,
Reinganum Jennifer F.
Publication year - 2013
Publication title -
the rand journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.687
H-Index - 108
eISSN - 1756-2171
pISSN - 0741-6261
DOI - 10.1111/1756-2171.12012
Subject(s) - argument (complex analysis) , moral hazard , value (mathematics) , compensation (psychology) , business , private information retrieval , microeconomics , law and economics , economics , actuarial science , computer science , incentive , computer security , social psychology , psychology , biochemistry , chemistry , machine learning
Over the last eight centuries, lawyers in common law countries have generally been precluded from buying their clients’ cases. Recently, a number of economists and lawyers have argued that sale should be allowed so as to eliminate moral hazard, particularly when contingent fees are used; this argument is based on full‐information reasoning. However, if the lawyer has private information about the case value, then compensation demands potentially signal this value when the client can search over lawyers. We provide a formal model and a family of computational examples that show that allowing (possibly partial) purchase can reduce expected social efficiency .