Sam hires an attorney to present a court case. If Sam wins the case, h

Sam hires an attorney to present a court case. If Sam wins the case, he will receive some money. This payoff is a function of the attorney’s hours and which judge is assigned the case that day.

Judge A is very understanding toward people in Sam’s position, but judge B is very harsh toward people like Sam. Is it possible for Sam to get the attorney to deliver the optimal amount of effort and make the attorney bear all of the risk?

ANSWER

Yes. If Sam accepts a fixed payment from the attorney and lets the attorney keep the proceeds, if any, from the case, the attorney bears all of the risk. Since the attorney will enjoy the full marginal benefit of her effort, she puts in the optimal level of effort.