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Lawyers As Agents Of The Devil In A Prisoner'S Dilemma Game

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  • ASHENFELTER, O.
  • BLOOM, D.
Abstract
Do the parties in a typical dispute face incentives similar to those in the classic prisoner's dilemma game? In this paper, we explore whether the costs and benefits of legal representation are such that each party seeks legal representation in the hope of exploiting the other party, while knowing full well that failing to do so will open up the possibility of being exploited. The paper first shows how it is possible to test for the presence of such an incentive structure in a typical dispute resolution system. It then reports estimates of the incentives for the parties to obtain legal representation in wage disputes that were settled by final-offer arbitration in New Jersey. The paper also reports briefly on similar studies of data from discharge grievances, courtannexed disputes in Pittsburgh, and child custody disputes in California. In each case, the data provide evidence that the parties face strong individual incentives to obtain legal representation which makes the parties jointly worse off. Using our New Jersey data, we find that expert agents may well have played a productive role in moderating the biases of their clients, but only early on in the history of the system. Over time, the parties slowly evolved to a non-cooperative equilibrium where the use of lawyers becomes nearly universal, despite the fact that agreeing not to hire lawyers is cheaper and does not appear to alter arbitration outcomes.
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Suggested Citation

  • Ashenfelter, O. & Bloom, D., 1990. "Lawyers As Agents Of The Devil In A Prisoner'S Dilemma Game," Papers 57, Princeton, Woodrow Wilson School - Discussion Paper.
    • Handle: RePEc:fth:priwdp:57
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    Cited by:

    1. Robert H. Frank & Philip J. Cook, 2013. "Winner-Take-All Markets," Studies in Microeconomics, , vol. 1(2), pages 131-154, December.
    2. Juranek, Steffen, 2018. "Investing in legal advice," Information Economics and Policy, Elsevier, vol. 44(C), pages 28-46.
    3. Henry S. Farber & Michelle J. White, 1993. "A Comparison of Formal and Informal Dispute Resolution in Medical Malpractice," NBER Working Papers 4371, National Bureau of Economic Research, Inc.
    4. Jack Hirshleifer & Evan Osborne, 1996. "The Legal Battle," UCLA Economics Working Papers 749, UCLA Department of Economics.
    5. Juranek, Steffen, 2015. "Investing in legal advice - What determines the costs of enforcing intellectual property rights?," Discussion Papers 2015/20, Norwegian School of Economics, Department of Business and Management Science.
    6. Jean Olson Lanjouw, 1993. "Patent Protection: Of What Value and for How Long?," NBER Working Papers 4475, National Bureau of Economic Research, Inc.
    7. J. Ryan Lamare, 2020. "The Devil Is in the Details: Attorney Effects on Employment Arbitration Outcomes," ILR Review, Cornell University, ILR School, vol. 73(2), pages 456-478, March.
    8. Robert M. Hutchens, "undated". "A Path to Good Jobs? Unemployment and Low Wages: The Distribution of Opportunity for Young Unskilled Workers," Economics Public Policy Brief Archive 11, Levy Economics Institute.
    9. Hagmann, David & Feiler, Daniel, 2020. "The Agent-Selection Dilemma in Distributive Bargaining," OSF Preprints y6tq2, Center for Open Science.
    10. Halla, Martin, 2007. "Divorce and the Excess Burden of Lawyers," IZA Discussion Papers 2962, Institute of Labor Economics (IZA).
    11. Jack Hirshleifer & Evan Osborne, 1999. "Truth and the Legal Battle," UCLA Economics Working Papers 790, UCLA Department of Economics.
    12. Farmer, Amy & Pecorino, Paul, 2024. "Proposal convergence and settlement under final offer arbitration," International Review of Law and Economics, Elsevier, vol. 77(C).
    13. Bruce D. Meyer, 1992. "Policy Lessons from the U.S. Unemployment Experiments," NBER Working Papers 4197, National Bureau of Economic Research, Inc.
    14. Dr Ronald W. McQuaid, 1994. "Partnerships And Urban Economic Development," Working Paper p13, Departement of Economics, Napier University.

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    More about this item

    Keywords

    lawyers ; game theory;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D02 - Microeconomics - - General - - - Institutions: Design, Formation, Operations, and Impact
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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