Moral Hazard and Agency Relationship in Sequential Litigation - HAL-SHS - Sciences de l'Homme et de la Société Access content directly
Journal Articles International Review of Law and Economics Year : 2015

Moral Hazard and Agency Relationship in Sequential Litigation

Abstract

The aim of this paper is to determine the optimal fee contract between a plaintiff and his lawyer in a trial process where liability and damages are treated sequentially: the court determines liability at the first stage and chooses damages at the second one. The plaintiff–lawyer relationship is embedded in a dynamic principal-agent setup where the lawyer's effort is unobservable by her client. It is shown that such a sequential process induces an interesting spillover effect for the plaintiff: the prospect of payment at the second period acts as carrot for the first period by inciting the lawyer to make effort in the liability stage in order to enjoy the reward in case of winning when damages are litigated. This effect implies a particular contractual design where the lawyer gets no transfer from the plaintiff at the first period.
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Dates and versions

halshs-01309094 , version 1 (30-08-2022)

Identifiers

  • HAL Id : halshs-01309094 , version 1

Cite

Christian At, Yannick Gabuthy. Moral Hazard and Agency Relationship in Sequential Litigation. International Review of Law and Economics, 2015, 41, pp.86-90. ⟨halshs-01309094⟩

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UNIV-FCOMTE CRESE
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