Justice in Arbitration: The Consumer Perspective

International Journal of Conflict Management, Vol. 32 No. 4, (2021) pp. 626-647.

52 Pages Posted: 28 May 2021 Last revised: 4 Aug 2021

See all articles by Farshad Ghodoosi

Farshad Ghodoosi

California State University, Northridge, Nazarian School of Business & Economics,

Monica Sharif

California State University, Los Angeles

Date Written: May 27, 2021

Abstract

Purpose: Arbitration—a binding private third-party adjudication—has been the primary legal way for resolution of consumer disputes. Consumers, however, rarely use arbitration to resolve their disputes while evidence suggests that their disputes remain unresolved. Contrary to the current prevailing emphasis on who’s winning in arbitration, our study establishes that consumers believe that the court is more just than arbitration, regardless of the outcome. Our study further establishes that consumers’ perceived poor legitimacy and lack of familiarity, not cost calculation, are what drive their justice perception.

Methodology: In three experimental studies, participants were presented with scenarios in which they were to envision themselves amidst a consumer dispute. The scenarios were followed by survey questions that examined individuals’ perceptions of justice. Three mediating variables of legitimacy, cost and familiarity were also examined.

Findings: The results suggest that consumers hold a high perception of justice for court as opposed to arbitration. Even though a favorable outcome increases consumers’ perception of justice, the results suggest that consumers find courts to be fairer regardless of the outcome. Familiarity and legitimacy mediate this relationship, not cost.

Originality: Current research does not provide an adequate explanation for consumers’ underutilization of arbitration nor does it focus on correct factors. Studies in psychology and law primarily focus on ex post feelings of individuals after dispute resolution, ex post favorable outcomes, and ex ante cost-benefit analysis. The present study for the first time analyzes ex ante consumer perception of justice.

Keywords: Mandatory Arbitration, Access to Justice, Behavioral Legal Studies, Organizational Behavior, Justice Perception, Business Administration, Industrial Organization, Law

Suggested Citation

Ghodoosi, Farshad and Sharif, Monica, Justice in Arbitration: The Consumer Perspective (May 27, 2021). International Journal of Conflict Management, Vol. 32 No. 4, (2021) pp. 626-647., Available at SSRN: https://ssrn.com/abstract=3854912

Farshad Ghodoosi (Contact Author)

California State University, Northridge, Nazarian School of Business & Economics, ( email )

18111 Nordhoff St
Northridge, CA 91330
United States

Monica Sharif

California State University, Los Angeles ( email )

United States

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