IDEAS home Printed from https://ideas.repec.org/p/zbw/vfsc16/145686.html
   My bibliography  Save this paper

Managing a Conflict

Author

Listed:
  • Schneider, Johannes
  • Balzer, Benjamin

Abstract

We study the optimal design of alternative dispute resolution (ADR) mechanisms by a third-party mediator. ADR takes place before two litigants face each other in court. Litigation is a legal contest with players who are privately informed about the cost of collecting admissible evidence. Players update their beliefs after the mediation process, but before they decide on evidence collection. Different from standard mechanism design problems, the belief-system post-ADR is important for the outcome of the continuation game: within litigation, choice variables are strategic complements and the evidence supplied is driven by the belief system. There is an incentive for parties to misreport in ADR to profit from this deviation in litigation should ADR fail to resolve the conflict. We show that optimal ADR has to break down on-path in some cases to screen the players with respect to their costs. Furthermore, ADR induces truthful reporting by creating post-breakdown beliefs which are independent of own type-reports during ADR. To reduce inefficiency vis-à-vis symmetric litigation, optimal ADR induces asymmetric breakdown beliefs even for ex-ante symmetric types to increase the settlement rate compared to symmetric mechanisms. Independent of the set of parameters, ADR achieves settlement for the majority of cases.

Suggested Citation

  • Schneider, Johannes & Balzer, Benjamin, 2016. "Managing a Conflict," VfS Annual Conference 2016 (Augsburg): Demographic Change 145686, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc16:145686
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/145686/1/VfS_2016_pid_6654.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Michael R. Baye & Dan Kovenock & Casper G. Vries, 2005. "Comparative Analysis of Litigation Systems: An Auction-Theoretic Approach," Economic Journal, Royal Economic Society, vol. 115(505), pages 583-601, July.
    2. Che, Yeon-Koo & Gale, Ian, 2000. "Difference-Form Contests and the Robustness of All-Pay Auctions," Games and Economic Behavior, Elsevier, vol. 30(1), pages 22-43, January.
    3. Cramton Peter C. & Palfrey Thomas R., 1995. "Ratifiable Mechanisms: Learning from Disagreement," Games and Economic Behavior, Elsevier, vol. 10(2), pages 255-283, August.
    4. Michael R. Baye & Dan Kovenock & Casper G. Vries, 1996. "The all-pay auction with complete information," Springer Books, in: Roger D. Congleton & Arye L. Hillman & Kai A. Konrad (ed.), 40 Years of Research on Rent Seeking 1, pages 209-223, Springer.
    5. Celik, Gorkem & Peters, Michael, 2011. "Equilibrium rejection of a mechanism," Games and Economic Behavior, Elsevier, vol. 73(2), pages 375-387.
    6. Doornik, Katherine, 2014. "A rationale for mediation and its optimal use," International Review of Law and Economics, Elsevier, vol. 38(C), pages 1-10.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Correia-da-Silva, João, 2020. "Self-rejecting mechanisms," Games and Economic Behavior, Elsevier, vol. 120(C), pages 434-457.
    2. Zheng, Charles Z., 2019. "Necessary and sufficient conditions for peace: Implementability versus security," Journal of Economic Theory, Elsevier, vol. 180(C), pages 135-166.
    3. Jingfeng Lu & Zongwei Lu & Christian Riis, 2021. "Peace through bribing," Papers 2107.11575, arXiv.org, revised Apr 2023.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Emmanuel Dechenaux & Dan Kovenock & Roman Sheremeta, 2015. "A survey of experimental research on contests, all-pay auctions and tournaments," Experimental Economics, Springer;Economic Science Association, vol. 18(4), pages 609-669, December.
    2. Zheng, Charles Z., 2019. "Necessary and sufficient conditions for peace: Implementability versus security," Journal of Economic Theory, Elsevier, vol. 180(C), pages 135-166.
    3. Segev, Ella & Sela, Aner, 2014. "Sequential all-pay auctions with noisy outputs," Journal of Mathematical Economics, Elsevier, vol. 50(C), pages 251-261.
    4. Jin Yeub Kim, 2022. "Neutral public good mechanisms," PLOS ONE, Public Library of Science, vol. 17(4), pages 1-16, April.
    5. Jia, Hao & Skaperdas, Stergios & Vaidya, Samarth, 2013. "Contest functions: Theoretical foundations and issues in estimation," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 211-222.
    6. Subhasish Chowdhury & Roman Sheremeta, 2011. "A generalized Tullock contest," Public Choice, Springer, vol. 147(3), pages 413-420, June.
    7. Reut Megidish & Aner Sela, 2013. "Allocation of Prizes in Contests with Participation Constraints," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(4), pages 713-727, December.
    8. Markus LANG & Alexander RATHKE & Marco RUNKEL, 2010. "The Economic Consequences Of Foreigner Rules In National Sports Leagues," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 31, pages 47-64.
    9. Gorkem Celik & Michael Peters, 2016. "Reciprocal relationships and mechanism design," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(1), pages 374-411, February.
    10. Kai Konrad & Wolfgang Leininger, 2007. "The generalized Stackelberg equilibrium of the all-pay auction with complete information," Review of Economic Design, Springer;Society for Economic Design, vol. 11(2), pages 165-174, September.
    11. J. Amegashie, 2006. "A contest success function with a tractable noise parameter," Public Choice, Springer, vol. 126(1), pages 135-144, January.
    12. Ian A. MacKenzie & Markus Ohndorf, 2016. "Caps on Coasean transfers," Oxford Economic Papers, Oxford University Press, vol. 68(2), pages 566-584.
    13. Konrad, Kai A. & Kovenock, Dan, 2009. "Multi-battle contests," Games and Economic Behavior, Elsevier, vol. 66(1), pages 256-274, May.
    14. Christian Ewerhart, 2015. "Mixed equilibria in Tullock contests," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(1), pages 59-71, September.
    15. Prokopovych, Pavlo & Yannelis, Nicholas C., 2023. "On monotone pure-strategy Bayesian-Nash equilibria of a generalized contest," Games and Economic Behavior, Elsevier, vol. 140(C), pages 348-362.
    16. J. Atsu Amegashie, 2012. "A Nested Contest: Tullock Meets the All-pay Auction," CESifo Working Paper Series 3976, CESifo.
    17. Kirkegaard, René, 2013. "Incomplete information and rent dissipation in deterministic contests," International Journal of Industrial Organization, Elsevier, vol. 31(3), pages 261-266.
    18. Yizhaq Minchuk & Aner Sela, 2020. "Contests with insurance," Review of Economic Design, Springer;Society for Economic Design, vol. 24(1), pages 1-22, June.
    19. Helmut Dietl & Egon Franck & Martin Grossmann & Markus Lang, 2009. "Contest Theory and its Applications in Sports," Working Papers 0029, University of Zurich, Center for Research in Sports Administration (CRSA).
    20. José Alcalde & Matthias Dahm, 2007. "Tullock and Hirshleifer: a meeting of the minds," Review of Economic Design, Springer;Society for Economic Design, vol. 11(2), pages 101-124, September.

    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:vfsc16:145686. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/vfsocea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.