The Law and Economics of Class Actions in Europe
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The Law and Economics of Class Actions in Europe

Lessons from America

Edited by Jürgen G. Backhaus, Alberto Cassone and Giovanni B. Ramello

This well-documented book discusses the power and limitations of class actions with insights and analysis from a panel of distinguished scholars. It pays special attention to the introduction and the applicability of such a legal device in European civil law countries. The book offers a broad legal and economic investigation, drawing insights from US judicial experience and giving a rigorous discussion of both the philosophical and constitutional aspects and the economic mechanisms and incentives set up by class actions.
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Chapter 11: Good Law and Economics Needs Better Microeconomic Models: The Case Against ‘Contingent Fees’ as Application of Agency Models to the Professions

Lorenzo Sacconi


Lorenzo Sacconi 1. INTRODUCTION Economic analysis of the law aims at understanding whether legal rules are designed as adequate mechanisms of incentive strong enough to induce economic agents (for example firms, workers, tax payers or professionals) to contribute efficiently to the creation of wealth, production of a surplus, producing a public good or the reduction of a public bad or a risk. One basic idea is that the law doesn’t reach its goal directly but rather through affecting the economic agents’ choices. They interact under the conditions put in place (in part) by a legal framework (and in part they react to these constraints) as far as economic agents are seen as (bounded) rational players participating in a game where the law sets the rules but doesn’t uniquely determine outcomes. Outcomes are produced by how economic agents make their choices under the constraints set (or by taking advantage of the opportunities posted) by the rules – inter alia. Thus, legal rules may generate the effects a legislator desires – if it was a wise ‘designer’, but also unexpected outcomes in the case that actual incentives and opportunities of action were not appropriately considered. The result will be consequently a (Nash) equilibrium induced by the rules (since the law influences the ‘rules of the game’), but not univocally determined because only the convergence of the players’ learning and expectations toward a particular equilibrium point can explain why a given equilibrium has been reached, especially if multiple equilibria are possible. 178 Columns Design XML...

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