Rent-Seeking and Litigation: The Hidden Virtues of Limited Fee Shifting

Emanuela Carbonara, Francesco Parisi, Georg Von Wangenheim

Research output: Contribution to journalArticlepeer-review

6 Scopus citations

Abstract

In the past couple of decades, scholars have predominantly employed rent-seeking models to analyze litigation problems. In this paper, we build on the existing literature to show how alternative fee-shifting arrangements (e.g., the American rule and English rule with limited fee-shifting) affect parties' litigation expenditures and their decisions to litigate. Contrary to the prevailing wisdom, we discover that, when fee shifting is limited, the English rule presents some interrelated advantages over the American rule, including the reduction of litigation rates and the possible reduction of expected litigation expenditures. Our results unveil a hidden virtue of limited fee shifting, showing that an increase in such limit may lead to a desirable sorting of socially valuable litigation.

Original languageEnglish (US)
Pages (from-to)113-148
Number of pages36
JournalReview of Law and Economics
Volume11
Issue number2
DOIs
StatePublished - Jul 1 2015

Keywords

  • American rule
  • English rule
  • limited fee-shifting
  • litigation
  • rent-seeking

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