MEDIATION AND other techniques (known generally as Alternative Dispute Resolution – ADR) are highly effective alternatives to litigation. This paper explores the game-theoretical reasons underpinning the effectiveness of these techniques, and the reasons why litigation or arbitration may not be the best methods for resolving certain disputes. There is considerable recent literature on mediation1 and other alternative dispute resolution (ADR) techniques.2 Much of this literature provides anecdotal or statistical evidence3 to support the assertion that these techniques are effective in practice and provide certain advantages when compared to the traditional adversarial process of litigation.4 The purpose of this article is to apply elementary game-theoretical considerations to show that there are fundamental differences between litigation and ADR processes,5 and that these differences explain why ADR can, in some circumstances, be more effective than litigation. ### (a) Interests Versus Rights With respect to dispute resolution methods, it is important to distinguish between interests and rights. Interests are defined by a party in an interaction and are the things that that party is interested in (money, recognition, physical goods, and so on). Rights are given by an external framework, for example national laws or contracts between parties. In litigation, disputes are resolved by reference to the parties' rights, whereas in ADR there is more emphasis on parties'; interests.6 Table 1 shows the classification of some dispute resolution mechanisms with respect to this distinction. View this table: Table 1: Taxonomy of Methods The main difference between evaluative mediation and litigation is the greater formality and higher cost of the latter. In fact, most disputes that go to litigation are resolved through negotiation, so in many cases the litigation process itself can be seen as a way (albeit an expensive way) of obtaining the information required to find a compromise solution, which is the purpose of evaluative mediation. ### (b) Methods Based on Interests Most …