What Clients Want: Choices between Lawyers' Offerings

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. We analyze a client's choice of contract in auctions where Dutch law firms compete for cases. The distinguishing feature is that lawyers may submit bids with any fee arrangement they prefer: an hourly rate, a fixed fee or a "mixed fee," which is a time-capped fixed fee plus an hourly rate for any additional hours should the case take longer than expected. This format of selling legal services is unusual in that it both forces lawyers to compete directly against each other and allows clients to easily compare these different offers. We estimate a choice model for clients and find robust evidence that hourly rate bids are a client's least-preferred choice. Our findings tentatively contradict lawyers' often made argument that hourly rates are in a client's best interest. Terms of use: Documents in

The Pricing Structure of Legal Services: Do Lawyers Offer What Clients Want?

“…If a mixed-fee bid has a dominated flat-fee part as compared to a competing fixed fee, it can be labeled as 'dominated,' as for any number of hours worked on the case the mixed fee will yield a dominated payment as compared to the fixed fee. Similarly, a mixed fee may yield a dominated payment for any possible realization of hours compared to a relatively low hourly fee (seeFelső et al, 2015, for a more detailed exposition). 12 Note that absolute values of experience or distance could in principle yield different results, as some auctions are not rewarded, which might be the case because all bidding lawyers are insufficiently experienced or are located too far away.…”