One psychological explanation for the durability of billing by the hour

An article in GC Mid-Atlantic, Sept. 2007 at 15, reviews the usual reasons given for the durability of billing by the hour (See my post of Oct. 26, 2005 for my own article on the topic.). The author, my former partner Dan DiLucchio of Altman Weil, makes a point that I haven’t seen.

He writes that “studies of consumer behavior indicate that people don’t need to know they got the best deal, just that they didn’t pay more than the next person.” If a general counsel pays law firm partner X $800 an hour and believes that X charges everyone the same exhorbitant rate, then the general counsel may grumble but find psychological comfort in the shared misery. If the general counsel negotiates an alternative billing arrangement with partner X, the calm of comparability disappears.