The Effects of Litigants Wealth and Stake Size on Litigation Outcomes

The Effects of Litigants Wealth and Stake Size on Litigation Outcomes

We develop two models of litigation in which the probability of winning for a litigant depends on opposing attorneys relative capacity and effort levels. In the models, money can buy high-capacity attorneys; the plaintiff s attorney works either under a contingent fee or under an hourly fee, but the defendant s attorney works under an hourly fee. We find: (i) a litigant s wealth contributes only a little to an increase in her expected payoff; (ii) as stake size increases, the increasing rate of effort of the plaintiff s attorney under the contingent fee exceeds that of himself under the hourly fee as well as that of the defendant s attorney; (iii) thus, if the stake size is big enough, the contingent-fee scheme brings the plaintiff a more payoff than the hourly-fee scheme. These findings are applied to the O.J. Simpson trial and to the recent tobacco litigation in the United States.