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24 Eur. J.L. & Econ. 1 (2007)

handle is hein.journals/eurjlwec24 and id is 1 raw text is: Eur J Law Econ (2007) 24:1-13 DOI 10.1007/s10657-007-9018-6 Investigating the determinants of pretrial settlement rates: contingent versus non-contingent lawyers' fees Alberto Casagrande - Marco Spallone Published online: 2 August 2007 © Springer Science+Business Media, LLC 2007 Abstract In this article, we explore the possibility that the percentage of litiga- tions settled outside of court is affected by the degree of contingency of lawyers' fees. In our view, a litigation is a game where not only the plaintiff and the defendant, but also their lawyers are independent players. The main consequence of this assumption is that the authority to settle is allocated endogenously to either the clients or their lawyers, depending on the value of the relevant parameters. In this game theoretical setup, (1) we compare the incentives to settle provided by con- tingent and non-contingent lawyers' fees, and (2) we state the conditions under which settlement is more likely to happen. Keywords Pretrial settlement - Lawyers' fees JEL Classification KO - K4 1 Introduction Empirical evidence shows that the percentage of litigations settled outside of court varies widely across countries.1 For example, in the U.S., more than 80% of litigations do not reach court see Cooter and Rubinfeld (1989) and the U.S. Department of Justice (2002); in U.K., the percentage of litigations settled before trial is about 70% see The Lord Chancellor's Department (2002); in Italy, the same percentage drops below 55% see Ministero della Giustizia (2001). A. Casagrande - M. Spallone (E) LUISS-Guido Carli University of Rome, Rome, Italy e-mail: mspallone@luiss.it M. Spallone G. D'Annunzio University of Chieti and Pescara, Pescara, Italy I_ Springer

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