Optimal Attorney Advertising

Attorney advertising routinely targets tort victims. In this paper, 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 the marginal costs of litigation and advertising. It is shown that even though blanket prohibitions on attorney advertising are likely suboptimal, ethical regulations which increase the marginal cost of advertising may be justified. Nevertheless, despite the widespread use of legal services advertising, it is unclear whether law firms are currently advertising excessively or inefficiently low. Whether firms are advertising excessively from a social standpoint is a purely empirical question.