Lawyer's Incentive Contract in Arbitration : A Signaling Approach

This study suggests a signaling game model between the claimant and the lawyer. To convince the lawyer’s ability to the claimant, the lawyer has incentive to send a credible signal to the lawyer. We adopt the lawyer’s public relations as a signaling device. Taking advantage of lower marginal cost on public relations, the high type lawyer can separate himself from the low type one. We derive perfect Bayesian equilibria of the signaling game and refine them with a unique equilibrium by invoking Intuitive Criterion of Cho and Kreps(1987). Then we characterize the refined equilibrium.