What Clients Want: Choices between Lawyers’ Offerings

66 Pages Posted: 15 Mar 2015

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 25, 2015

Abstract

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.

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 25, 2015). Available at SSRN: https://ssrn.com/abstract=2577820 or http://dx.doi.org/10.2139/ssrn.2577820

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 )

Mohrenstraße 58
Berlin, 10117
Germany

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