Attorneys ' Compensation in Litigation with Bilateral Delegation by

We consider litigation between a plaintiff and a defendant in which each player hires an attorney who expends his effort on her behalf. We examine the equilibrium fixed fees and contingent fees for the attorneys in two legal systems: the system with the nonnegative-fixed-fee constraint and the system with the contingent-fee cap. We show that the fixed fees are always zero in the system with the nonnegative-fixed-fee constraint, and the contingent fees are always equal to the cap in the system with the contingent-fee cap. We also examine the equilibrium expected payoffs for the attorneys and the payoffs for the players in the two systems. By comparing these expected payoffs, we show that the attorneys prefer the system with the nonnegative-fixed-fee constraint, while the players prefer the system with the contingent-fee cap