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date: 06 April 2020

Abstract and Keywords

Alternative dispute resolution (ADR) refers to a variety of private processes for resolving disputes, independent of trial before a court of law. Economists are interested in ADR for two main reasons. First, from an ex post perspective, the manner in which disputes are resolved or decided in society affects the operation of the legal system and its cost-efficiency. Second, from an ex ante perspective, the manner in which rights are vindicated impacts primary behavior and investments in prospective dispute avoidance. The literature relating to the economic analysis of ADR can be divided into two facets: one facet is dedicated to the interests of litigating parties to make use of ADR mechanisms; the other is directed at the social interest in ADR. This chapter identifies the conditions under which parties will be incentivized to enter into ADR proceedings, and then moves on to examine the social welfare implications of ADR.

Keywords: ADR, alternative dispute resolution, social welfare, civil disputes, arbitration, mediation

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