Resolving contractual disputes: arbitration vs mediation
Chakravarty, Surajeet; Makris, Miltiadis
Date: 31 March 2005
Publisher
University of Bristol
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 ...
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.
Economics
Faculty of Environment, Science and Economy
Item views 0
Full item downloads 0