Stability as a Right to a Counsel of Choice: Lawyers' Matching Problem (joint with Kemal Kivanc Akoz, Emre Dogan and Onur Kesten)

R & R Games and Economic Behavior

We study pairwise-stable matchings of lawyers to indigent litigants. In this setting a negative externality arises: assigning a better lawyer to a litigant harms the opposing litigant and their lawyers. We characterize conditions under which stable matchings exist, and show that they correspond to situations in which the cases are primarily differentiated by the advantage they give to one of the sides, but some cases attract more media attention than others. We show that in any stable matching strong lawyers face weak opponents. We show that pairwise-stable matchings are efficient, but may not belong to the core.


JEL: C78, D62

Should lawyers lie to their clients? Biased expertise in negotiations

(previous title: "Negotiations, Expertise and Strategic Misinformation")

R & R   American Law and Economics Review

A plaintiff suffers harm of random value from a defendant. The informed defendant proposes a settlement to the uninformed plaintiff who additionally receives cheap-talk advice from her informed attorney. The attorney can be biased towards or against a trial.  A small bias against the trial does not change the outcome of the negotiation. A small bias towards the trial improves the outcome for the plaintiff.  The bias may depend on the contract signed by the plaintiff and the attorney. When,  the costs of litigation for the plaintiff are large, and the value of the harm is likely to be large, a contingency fee contract is signed and the attorney is biased against the trial. Otherwise, an hourly fee contract is signed and the attorney is biased for the trial. Contracts resulting in no bias are never signed.

Online Appendix

Old version of the paper (with continuous liability value) and its Online Appendix

JEL: D82, D83, D86, K41

Adversarial Career Concerns (joint with Rosa Ferrer)

R & R The Rand Journal of Economics

We study career concerns' effort incentives of two agents opposing each other such that only one can win (e.g., lawyers in court). As in the canonical career concerns' model, the outcome depends on unknown talents of the agents and their effort choices such that agents have implicit incentives to exert effort. We find that, regardless of the functional form, the strength of the implicit incentive is characterized by the ratio of two (endogenous) components: the covariance between the agent's talent and the outcome (individual specific component), and the variance of the outcome (common component). Thus, the agent with the stronger individual component has a stronger implicit incentive. Also, both agents' implicit incentives decrease as the variance of the outcome increases, such that they are minimal when both agents have equal probability of winning. We then introduce separability between effort and talent for further results.  We find that agents' incentives to exert effort are minimized when their opponent's talent is drawn from the same distribution and the setting is exogenously balanced. Overall, we argue that with adversarial career concerns, unbalancing the playing field.

Achieving Efficiency and Fairness in a Congested Lawyer Assignment Problem (joint with Emre Dogan and Onur Kesten)

American system of assigning indigent defendants to public lawyers is based on  denial of choice as a form of congestion management. Attempt to solve the apparent unfairness of the system by allowing defendants choice in Comal county, Texas resulted in  overcrowding of the most popular lawyers. We argue for implementing efficient mobility-free allocations, that is, efficient allocations which ensure that no defendant would like to unilaterally switch a lawyer. We show that such allocations always admit minimal envy among efficient allocations. We provide a modification of the Top Trading Cycles algorithm  (Shapley, Scartf,1974)  called the Congestion Cutting Top Trading Cycles algorithm, which always finds such an allocation. We demonstrate that no mobility-free and efficient mechanism is strategy-proof and derive the limit to individual gain from manipulation.


JEL: C78, D62

Matching Lawyers on Contests  (joint with Kemal Kivanc Akoz, Emre Dogan, and Behrang Kamali)

Consider an allocation problem of lawyers and prosecutors, to legal cases with indigent clients. Each allocation corresponds to a three-sided matching between lawyers, cases, and prosecutors. Once matched, lawyers and prosecutors exert costly effort to win the cases. Effort costs generate moral hazard, and the matching generates externalities across the two sides of cases. We find that pairwise stability implies negative sorting of lawyers and prosecutors in terms of their talents. However, in many cases total effort maximizing matching implies positive sorting. Moreover, stable matchings are especially bad for the worse-off defendants. Our model provides a benchmark for evaluating moral hazard in legal systems.

JEL: C78, D62

Dynamics of Collective Litigation (joint with Andrés Espitia De la Hoz )

In collective litigations the outcome of the trial may depend on the number of litigants. In this paper, we study how collectives form and explore actions that the defendant can take to interfere in this process. We propose a dynamic model of litigation in which a defendant faces the arrival of plaintiffs over time and where the defendant is privately informed about the scope of the harm she has caused (e.g. how many consumers have been exposed to a defective product). We show that when all plaintiffs are strategic the defendant can completely avoid the formation of a collective. However, if some plaintiffs (exogenously) join the collective then strategic plaintiffs may also join. We compare the baseline, in which all settlements are public, to a setting where the privacy of settlements is endogenous. We show that use of private settlements can decrease expected payments for some plaintiffs but may increase payments to subsequent ones. The defendant gains on the possibility of settling the case secretly only if the plaintiffs prior about the scope of the harm is low. 

JEL: D82, D83, K41

Trust and  Network Formation (joint with: Juan Camilo Cardenas, Davide Pietrobon, Tomás Rodríguez Barraquer, and Tatiana Velasco)

We study whether trust towards strangers is a determinant of social networks among an incoming cohort of first-year undergraduate students. We employ an experiment and survey questions to measure students' trust before they have substantial chances to meet and socialize. After four months, during which the students have many opportunities to interact, we elicit five networks capturing different relationships between them. The students' initial levels of trust do not significantly predict the relationships they formed after four months. In contrast, time of exposure, similarity in socioeconomic status, and hometown are relevant determinants of relationship formation.

Online Appendix  

JEL: C80, D85, D90, D91, Z13