Lawyers' Reputation and the Quality of Legal Services : an Economic Analysis of Self-regulation
Abstract: Against the law and economics literature that focuses on opportunistic behaviours by lawyers in a self-regulated market, we show that a high-quality steady-state exists in a market for legal services and that the likelihood of high quality increases when the market is self-regulated by the legal profession as compared with the situation where there is no self-regulation. Indeed, absent self-regulation in the market, individual reputation is the only informative and disciplinary device which operates. Introducing collective reputation of the legal profession into the analysis provides additional information to clients. The profession has an incentive to maintain a good collective reputation as this increases the clients’ willingness to pay for legal services and, therefore, the rent that accrues to the legal profession. We conclude that self-regulation of the legal profession may help to regulate quality when clients are faced with opportunistic lawyers.
