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We investigate the impact of observability of contracts between a plaintiff and his attorney on both the efficiency of the environmental conflict and the fairness of the resulting outcome from the environmental conflict. By including two specific game-theoretic models (an observable-contract game and an unobservable-contract game), we find two key results: (i) The unobservability of a contract may increase inefficiency of the environmental conflict in terms of legal efforts; however, (ii) the unobservability of a contract may increase the fairness of the outcome in terms of the plaintiff’s probability of winning the contest.

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Governments create contests to allocate resources to stakeholders, e.g., grants, contracts. The actions of these stakeholders can generate a positive externality for themselves—the contest winner can attract additional outside funding and donations from third-parties who want to jump on the winner’s bandwagon. Herein we examine the externalities arising from these contests created by governance and their impact on a virtuous circle of governance contests. Among various conditions that make governance virtuous, we focus on the equilibrium expected payoffs of stakeholders, the difference in them, and the rent-dissipation rates. Our study shows that the impact of externalities on the efficiency of governance depends on two key factors: (i) the choice of governance contests, the player-externality and the winner-externality, and (ii) the relative efficiency of stakeholders’ efforts.

We examine a two-stage litigation in which risk-averse litigants set contingent fees strategically for risk-neutral lawyers. In the first stage of the litigation, each litigant sets a fixed fee and a contingent fee for his lawyer. In the second stage, each lawyer exerts effort to win a lawsuit on behalf of the litigant. Employing the subgame-perfect equilibrium as a solution concept, we obtain the following results. First, if a litigant sets a higher rate of contingent fee, then the opponent follows suit and the contingent fee fraction increases in the difference in litigant’s utility between winning and losing the case. Second, changes in a litigant’s initial endowment have different effects on the contingent fee fraction depending upon litigant preferences, while an increase in the prize of the case always increases the contingent fee fraction regardless of litigant preferences.