Legal Advertising and Frivolous Lawsuits

Abstract

Following a recent wave of deregulation, lawyers now use a large variety of media to advertise their services. A common argument against this increasing reliance on advertising is that it might stir up frivolous lawsuits. In this article, we investigate the relevance of this argument by developing an asymmetric information game of litigation. The main results show that this stirring-up effect does not necessarily occur in equilibrium and advertising may improve welfare by decreasing the social cost of accidents. Therefore, the liberalization of legal advertising should not necessarily be considered as a threat to the efficiency of the tort system.