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Managing a conflict: optimal alternative dispute resolution

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  • Benjamin Balzer
  • Johannes Schneider

Abstract

We study optimal methods for Alternative Dispute Resolution (ADR), a technique to achieve settlement and avoid costly adversarial hearings. Participation is voluntary. Disputants are privately informed about their marginal cost of evidence provision. If ADR fails to engender settlement, the disputants can use the information obtained during ADR to determine what evidence to provide in an adversarial hearing. Optimal ADR induces an asymmetric information structure but makes the learning report‐independent. It is ex ante fair and decreases the disputants' expenditures, even if they fail to settle. We highlight the importance of real‐world mediation techniques, such as caucusing, for implementing optimal ADR.

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  • Benjamin Balzer & Johannes Schneider, 2021. "Managing a conflict: optimal alternative dispute resolution," RAND Journal of Economics, RAND Corporation, vol. 52(2), pages 415-445, June.
    • Handle: RePEc:bla:randje:v:52:y:2021:i:2:p:415-445
    DOI: 10.1111/1756-2171.12374
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    References listed on IDEAS

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    Cited by:

    1. Balzer, Benjamin & Schneider, Johannes, 2021. "Persuading to participate: Coordination on a standard," International Journal of Industrial Organization, Elsevier, vol. 78(C).
    2. Balzer, Benjamin & Schneider, Johannes, 2023. "Mechanism design with informational punishment," Games and Economic Behavior, Elsevier, vol. 140(C), pages 197-209.

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