Alternative dispute resolution and agency costs.

This research examines consumer choices of alternative dispute resolution in light of the various costs and benefits associated with each of those choices. An agency theoretic framework is employed to model the buyer-dispute resolver dyad in terms of a principal and agent relationship. Costs of mode of monitoring and incentive alignments through side payments in this dyadic relationship are envisioned as determinants of the consumer choice. A national random sample of consumers is used to test the hypothesized relationships. Results indicate that as the dollars at risk increase, consumers indicate a preference for litigation, over alternative forms of dispute resolution. (Abstract from author)