Strategy-Proof Multi-Issue Mediation: An Application to Online Dispute Resolution

Abstract

Mediation (assisted negotiation) is the preferred alternative dispute resolution approach that has given rise to a multibillion-dollar industry worldwide. Online dispute resolution (ODR) providers rely heavily on mechanized e-negotiation systems. Inspired by their structured negotiation systems, we follow a market design approach and develop a tractable framework in search of strategy-proof, efficient, and individually rational mediation mechanisms. We characterize the full family of such mechanisms and the domains of preferences in which they exist. A necessary and sufficient condition for the existence of such protocols is the so-called quid pro quo property; a weak condition that formulates preferences for compromise solutions. This paper was accepted by Axel Ockenfels, behavioral economics and decision analysis. Funding: S. Özyurt is grateful for the support he received from the Social Sciences and Humanities Research Council and the European Commission [Grant 659780]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.00383 .