An Economic Analysis of Conflict of Interest Regulation

Abstract

This paper analyzes the ethical rules applicable to attorney conflicts of interest as default terms which the legal system supplies in the absence of complete contracting by the attorney and client. Following an approach that is standard in the literature, we model the attorney-client relationship as an agency contract characterized by information and monitoring difficulties. We conclude that, in general, a regime that grants the client the right to bar subsequent, conflicting representation of other parties by the attorney, subject to ex post renegotiation by the attorney and client, represents an optimal approach to the problem.