Legal effort and optimal legal expenses insurance |
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| Institution: | 1. Department of Economics, European University Institute (EUI), Villa La Fonte, Via delle Fontanelle, 18, I-50014 Florence, Italy;2. Energy and Sustainable Development (ESD), Montpellier Business School, 2300 Avenue des Moulins, 34080 Montpellier, France;3. ESC Rennes School of Business, 2 rue Robert d’Arbrissel CS 76522, 35065 Rennes, Brittany, France;4. Department of Management Sciences Shaheed Zulfiqar Ali Bhutto Institute of Science and Technology, Islamabad, Pakistan;1. University of Duisburg-Essen, Centre for European Policy Studies, Brussels, King''s College, London, & Institute for the Study of Labor, Bonn, Germany;2. THM Business School, Giessen, Germany |
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| Abstract: | In this paper we derive optimal legal expenses insurance for litigants and payment method for lawyers when neither the litigant's quantity choice nor the lawyer's legal effort is contractible. Three points are highlighted as our conclusions. First, to design an optimal insurance-payment system, demand-side cost-sharing is necessary. Second, supply-side cost-sharing is necessary only if the quantity and effort are substitutes and the payment contract involves hourly fees. Third, the optimal insurance-payment system could be achieved under conditional fees and sliding fees. Reputation incentives and side-contracts are also discussed in this paper. |
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