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Mediation, arbitration and negotiation

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Author Info
Goltsman, Maria
Hörner, Johannes
Pavlov, Gregory
Squintani, Francesco

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Abstract

We compare three common dispute resolution processes - negotiation, mediation, and arbitration - in the framework of Crawford and Sobel [V. Crawford, J. Sobel, Strategic information transmission, Econometrica 50 (6) (1982) 1431-1451]. Under negotiation, the two parties engage in (possibly arbitrarily long) face-to-face cheap talk. Under mediation, the parties communicate with a neutral third party who makes a non-binding recommendation. Under arbitration, the two parties commit to conform to the third party recommendation. We characterize and compare the optimal mediation and arbitration procedures. Both mediators and arbitrators should optimally filter information, but mediators should also add noise to it. We find that unmediated negotiation performs as well as mediation if and only if the degree of conflict between the parties is low.

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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 4 (July)
Pages: 1397-1420
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Handle: RePEc:eee:jetheo:v:144:y:2009:i:4:p:1397-1420

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Web page: http://www.elsevier.com/locate/inca/622869

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Related research
Keywords: Communication Information Mechanism design Cheap talk Long cheap talk Arbitration Mediation Negotiation;

Cited by:
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  1. Maria Goltsman & Gregory Pavlov, 2008. "How to Talk to Multiple Audiences," UWO Department of Economics Working Papers 20081, University of Western Ontario, Department of Economics. [Downloadable!]
  2. Andreas Blume & Oliver Board & Kohei Kawamura, 2007. "Noisy Talk," ESE Discussion Papers 167, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
    • Board, Oliver J. & Blume, Andreas & Kawamura, Kohei, 2007. "Noisy talk," Theoretical Economics, Society for Economic Theory, vol. 2(4), pages 395-440, December. [Downloadable!]
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This page was last updated on 2009-11-7.

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