The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Dispute Resolution

  • Amy Farmer
  • Paul Pecorino
Reference work entry


The high cost of disputes creates an incentive for parties to disputes to settle. In civil litigation and arbitration, settlement failure may arise from asymmetric information or optimism. Devices to induce settlement include voluntary disclosure and mandatory discovery. The effects of these are considered, as are the English rule (whereby the loser at trial pays the reasonable legal costs of the winner), the use of contingency fees, and the operation of conventional arbitration and final offer arbitration. Researchers continue to propose new arbitration mechanisms in the hope of improving the dispute resolution process.


Asymmetric information Bargaining Signalling Screening Arbitration Final offer arbitration Contingency fees English rule Fee-shifting Optimism Self-serving bias 

JEL Classification

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Amy Farmer
    • 1
  • Paul Pecorino
    • 1
  1. 1.