Why Aren't Mediation and Arbitration More ... - Program on Negotiation

Many scholars have noted that the business community would greatly benefit from third-party dispute resolution services. The problem is, there isn?t much demand for mediation or arbitration. If the alternative dispute resolution field has in fact built a better mousetrap, why isn?t the market buying it?

J. Maurits Barendrecht and Berend de Vries of the Faculty of Law at Tilburg University (Tilburg, the Netherlands) explain this inconsistency in terms of imperfections in disputants? decisions that keep disputants from rationally dealing with their conflict.

The authors note that disputants use arbitration and mediation less frequently than their preferences on surveys would predict and than rational parties would. Barendrecht and De Vries also argue that the default option for dispute resolution is ?sticky.? In other words, whatever method is promoted in the parties? contract, whether implicitly or explicitly, will attract the majority of disputes.

The authors attribute this ?stickiness? in part to the goodwill that typically exists between parties that have reached agreement. When they draw up their contract, friendly parties fail to seriously consider the possibility of a dispute arising. Without such consideration, the courts end up as the default mechanism for disputes.

Even if one side proposes an alternative dispute resolution mechanism, the other side is likely to devalue the offer. In addition, parties are likely to prefer a known, inefficient system ? the courts- over a less known, more efficient system such as mediation or arbitration.

What can be done? First, management should replace lawsuits as the default option for a dispute with mediation, followed by arbitration. In addition, anyone who signs a contract should be aware of the natural tendency to underestimate the likelihood of a dispute. When this occurs, the logic of efficient dispute resolution is likely to prevail.

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