Suppose a Plaintiff Hires a Lawyer to Represent Her in a Court

question 44

Multiple Choice

Suppose a plaintiff hires a lawyer to represent her in a court case.Under which of the following contracts is efficiency in risk bearing assured?

• A) The lawyer is paid by the hour.
• B) The lawyer receives a share of the settlement.
• C) The lawyer receives a fixed fee.
• D) It is impossible to determine without the degree of risk aversion for each.

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Definitions:

Framing Error

A cognitive bias where information is presented or perceived in a way that influences judgment and decision-making, potentially leading to incorrect conclusions or actions.

Representativeness Heuristic

A cognitive bias in decision-making where the likelihood of an event is estimated based on how much it resembles existing stereotypes or patterns.

Availability Heuristic

A cognitive bias where people overestimate the importance or frequency of information that is readily available to them.

Anchoring and Adjustment Heuristic

A mental shortcut that influences the way people intuitively assess probabilities and make decisions based on initial information.