Optimal attorney advertising

Attorney advertising routinely targets tort victims. This paper reviews legal services advertising restrictions in the United States and abroad. A theoretical model is developed which incorporates advertising intensity, litigation costs, and an endogenous number of lawsuits. Since advertising induces victims to bring suit, it increases the level of injurer care. However, litigation costs are also incurred. At the optimum, the marginal benefit of deterrence equals the sum of marginal litigation and advertising costs. Extensions of the model are considered, including the possibility that advertising stirs up frivolous lawsuits and that firms use advertising to rent seek. Fee shifting and alternative fee structures are also discussed. Although blanket prohibitions on attorney advertising are likely suboptimal, some regulations may be justified. (C) 2012 Elsevier Inc. All rights reserved.