Modelling Arbitration: Evaluating Risks and Settlements of Disputes Using Regret Theory
Massachusetts Institute of Technology (MIT); Masdar Institute of Science and Technology (MIST); Higher Colleges of Technology
October 25, 2011
International Proceedings of Economics Development and Research, Vol. 15, pp. 89-92, 2011
This paper presents a mathematical model to evaluate the risks of arbitration in contractual disputes to decide whether or not to raise an arbitration case for a claim. It adds the ingredient of a regret theory approach for taking that decision, if an amicable settlement amount is not agreed. Many other models that are based on decision trees, game theory, and neural networks lack a regret theory approach. The inclusion of regret theory in this model may be adaptable to any other models available making the decision more realistic through a stochastic approach of optimizing the maximum benefit for the minimum regret.
Number of Pages in PDF File: 5
Keywords: arbitration, construction contracts, dispute, modelling, project management, risk, settlement agreements
JEL Classification: C1, C4, C5, C6, C7, C8, D81, K12, K41, L74Accepted Paper Series
Date posted: October 26, 2011 ; Last revised: January 10, 2012
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