Resolving contractual disputes: arbitration vs mediation

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Resolving contractual disputes: arbitration vs mediation

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Title: Resolving contractual disputes: arbitration vs mediation
Author: Chakravarty, Surajeet
Makris, Miltiadis
Publisher: University of Bristol
Date Issued: 2005-03-31
Abstract: In this paper we analyze contracts written on potentially non-verifiable states. We first show that the contract always enters a dispute phase. We analyze two possible legal rules which can be used to resolve the disputes. Under both rules the paper derives the optimal contract. An interesting feature of the optimal contract is that for low verifiability likelihood the agent is always rewarded unless there is failure. The other result is that under both legal rules used first-best effort and more than first-besteffort level can be implemented, depending on how small the likelihood of verifiability is.
Type: Working Paper
Description: Working paper published by Centre for Market and Public Organisation, University of Bristol Department of Economics
Keywords: contractsdispute resolution

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