What Clients Want: Choices between Lawyers' Offerings

Discussion Paper 14-020/VII

33 Pages Posted: 12 Feb 2014

See all articles by Flora Felso

Flora Felso

CPB Netherlands Bureau of Economic Policy Analysis

Sander Onderstal

University of Amsterdam; Tinbergen Institute

Jo Seldeslachts

KU Leuven - Faculty of Business and Economics (FEB); German Institute for Economic Research (DIW Berlin)

Date Written: February 10, 2014

Abstract

We analyze a client's choice of contract in auctions where Dutch law firms compete for routine cases. The distinguishing feature here 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. Furthermore, 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 empirically 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.

Keywords: Lawyers' fee arrangements, clients' choices, discrete choice models

JEL Classification: C25, D43, K10, K40

Suggested Citation

Felso, Flora and Onderstal, Sander and Seldeslachts, Jo, What Clients Want: Choices between Lawyers' Offerings (February 10, 2014). Discussion Paper 14-020/VII, Available at SSRN: https://ssrn.com/abstract=2393439 or http://dx.doi.org/10.2139/ssrn.2393439

Flora Felso (Contact Author)

CPB Netherlands Bureau of Economic Policy Analysis ( email )

P.O. Box 80510
2508 GM The Hague, 2585 JR
Netherlands

Sander Onderstal

University of Amsterdam ( email )

Roetersstraat 11
Amsterdam, 1018 WB
Netherlands

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Jo Seldeslachts

KU Leuven - Faculty of Business and Economics (FEB) ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstra├če 58
Berlin, 10117
Germany

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