DP5959 Governance Reform in Legal Service Markets

Author(s): Paul A Grout , Ian Jewitt , Silvia Sonderegger

Publication Date: November 2006

Keyword(s): governance , legal services

JEL(s): D02 , D78 , D86

Programme Areas: Public Policy

Link to this Page: www.cepr.org/pubs/dps/DP5959.asp.asp

This paper discusses proposed governance reforms of legal services markets. The model distinguishes between a status quo position supported by a system of professionally enforced collective reputation and forms of governance based more squarely on market mechanisms. We identify a number of forces which determine the success of reform. Focussing particularly on the rent recapture and relationship substitution effects, we highlight their impact on client welfare and quality of legal services in different types of market according to whether clients are transient or repeated users of the service.