The market for lawyers: The value of information on the quality of legal services

Abstract

We study the value of information on the quality of legal services by analyzing the incentives of litigants to hire high-quality lawyers, the incentives of lawyers to invest in quality-enhancing activities and the effect of legal representation on the decision-making behaviour of adjudicators. In a setting where adjudicators have reputational concerns, we show that better information over the quality of legal representation generates a tradeoff. On the one hand, it allows for a better match between the value of a legal dispute and the quality of the legal representation. This also has the effect of increasing the incentives of lawyers to invest in quality-enhancing training. On the other hand, better information over the quality of legal representation may induce adjudicators to bias their decisions in favour of the litigant with the highest-quality lawyer and this generates allocative inefficiency. We discuss the implications of these effects on the desirability of quality certification system (such as the Queen’s Counselor system) in the market for the legal professions.