Managing a conflict: optimal alternative dispute resolution Articles uri icon

publication date

  • June 2021

start page

  • 415

end page

  • 445

issue

  • 2

volume

  • 52

International Standard Serial Number (ISSN)

  • 0741-6261

Electronic International Standard Serial Number (EISSN)

  • 1756-2171

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.