Stability as a Right to a Counsel of Choice: Lawyers' Matching Problem (joint with Kemal Kivanc Akoz, Emre Dogan and Onur Kesten)
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")Forthcoming: 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.
Old version of the paper (with continuous liability value) and its Online Appendix
JEL: D82, D83, D86, K41
Trust and and the Dynamics of Network Formation (joint with: Juan Camilo Cardenas, Davide Pietrobon, Tomás Rodríguez Barraquer, and Tatiana Velasco)
R & R Network Science
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.
JEL: C80, D85, D90, D91, Z13
Incentivizing Public Lawyers and Enhancing Fairness via Sorting in Adversarial Systems (joint with Kemal Kivanc Akoz, Emre Dogan, and Behrang Kamali)
In the American adversarial system, case outcomes significantly depend on the efforts of opposing lawyers. We explore the impact of matching public attorneys with prosecutors on effort incentives and welfare. Negative assortative matching (NAM) between attorneys and prosecutors results in the most egalitarian distribution of efforts across cases, but discriminates among identical defendants. Positive assortative matching reduces discrimination while maximizing overall effort. Allowing defendants to choose counsel, as in inquisitorial European systems, leads to a stable matching, which is NAM. Consequently, adopting such a system could adversely affect incentives and, paradoxically, the welfare distribution of indigent defendants in the U.S.
slides
JEL: C78, D62
Adversarial Career Concerns: Theory and Evidence on Lawyers' Career Trajectories (joint with Rosa Ferrer)
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.
JEL: D80, J24, J44, K41, L14
Achieving Efficiency and Fairness in a Congested Lawyer Assignment Problem (joint with Emre Dogan and Onur Kesten)
The American system of assigning public lawyers to indigent defendants relies on denying choice as a method of congestion management. An attempt to address the perceived unfairness of this system by allowing defendants to choose their lawyers in Comal County, Texas, led to overcrowding of the most popular lawyers. We propose the implementation of efficient mobility-free assignments, which ensure that no defendant would prefer to unilaterally switch lawyers. . We show that such assignments always admit minimal envy among efficient ones. We demonstrate that any mobility-free mechanism is manipulable but not obviously manipulable, and derive the limit to individual gain from manipulation. We characterize mobility-free mechanisms whose Nash equilibria remain mobility-free, even when some defendants are naive We provide an algorithm for adjusting any efficient and individually rational non-congested assignment mechanism (e.g., Top Trading Cycles) for congestion, called Congestion Cutting. We demonstrate that Congestion Cutting algorithms can be extended for environments with maximal capacity and relevant priorities, so that mobility-freeness, no-justified-envy, and defendant-optimality are simultaneously satisfied.
JEL: C78, D62
Effects of choosing advisor on financial decision making (joint with: Lixuan Zhao)
We examine how the choice of advisor influences decision-making under uncertainty through a lab experiments. Participants were tasked with constructing a portfolio from three assets, where one asset was first-order stochastically dominated by a combination of the other two. The control group made decisions without any advice, while the treatment group selected advisors from a popular finance self-help social media platform. Our findings indicate that exposure to advice led to reduced and less frequent investments in the stochastically dominated asset, albeit with increased overall risk exposure. Ultimately, the option to choose advisors positively impacted both self-reported and simulated welfare.
JEL: C91, D81, G41
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