Mediation, arbitration and negotiation. (English) Zbl 1169.91009
Summary: We compare three common dispute resolution processes - negotiation, mediation, and arbitration - in the framework of V. P. Crawford and J. Sobel [Econometrica 50, 1431–1451 (1982; Zbl 0494.94007)]. 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.
MSC:
| 91A28 | Signaling and communication in game theory |
| 91A10 | Noncooperative games |
| 91A80 | Applications of game theory |
Keywords:
communication; information; mechanism design; cheap talk; long cheap talk; arbitration; mediation; negotiationCitations:
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