@article{ref1,
title="The optimality of contingent fees in the agency problem of litigation",
journal="International review of law and economics",
year="2008",
author="Wang, Susheng",
volume="28",
number="1",
pages="23-31",
abstract="Linear contracts are of particular interest to economists. They have a simple structure, yet they are very popular in practice. In this regard, plaintiff-lawyer contractual relationships are of particular interest. Lawyers' fees are mostly paid by a sharing rule and they are typically a fixed proportion of the recovery across all lawsuits of the same type and this fixed proportion typically stays constant for many years. Such a simple and stable form of contract is puzzling to contract theorists. This paper presents a simple agency model with a risk-averse principal and a risk-neutral agent. We show that the observed puzzling features of contracts in litigation are in fact optimal behaviors, if a lawyer's effort has a constant marginal cost.<p />",
language="",
issn="0144-8188",
doi="10.1016/j.irle.2007.12.006",
url="http://dx.doi.org/10.1016/j.irle.2007.12.006"
}