On Lawyer Compensation When Appeals Are Possible

Abstract

This paper describes how plaintiff should compensate lawyers, who choose unobservable effort, when litigation may proceed from the trial to the appeals court. We find that, when it is very likely that the defendant will appeal, transfers made to the lawyer only after an appeals court’s ruling are key instruments in incentivizingbothtrial and appeal court effort. Indeed, the lawyer may not receive any transfer after the trial court’s ruling. In contrast, when reaching the appeals stage is unlikely, a favorable trial court ruling triggers a positive transfer to the lawyer and first-best appeals effort. In our setup, the lawyer may receive a lower transfer after winning in both the trial and the appeals court as compared to the scenario in which the first-instance court ruled against the plaintiff and the appeals court reversed that ruling.

Salience Bias and Overwork

“…The moral hazard model with hidden action, where both the principal and the wealth-constrained agent have linear utility functions for money, was applied to address questions of organization design [5,6], sales force compensation [7][8][9], job design [10][11][12][13][14], team compensation [15], delegation [16,17], lawyer compensation [18], human capital accumulation [8], and privacy protection at the workplace [19]. Experimental evidence for the predictions of the moral hazard model are provided by Hoppe and Kusterer [11], Nieken and Schmitz [20], and Hoppe and Schmitz [21].…”

How (Not) to Purchase Novel Goods and Services: Specific Performance Versus At-Will Contracts

“…andBolton and Dewatripont (2005).6 For early papers in this literature, see alsoBaliga and Sjöström (1998) andPitchford (1998).More recent contributions include e.g Ohlendorf and Schmitz (2012),Chen and Chiu (2013),. Schmitz (2013b, 2021),Schmitz (2013),Kragl and Schöttner (2014),Tamada and Tsai (2014),Axelson and Bond (2015),Kräkel and Schöttner (2016),Cato and Ishihara (2017),At et al (2019),Kräkel (2021), andMüller and Schmitz (2021). This literature is focused on motivating agents to exert high e¤ort, which is not an issue in the present paper.…”