Game Theory and Dispute System Design: Making Mediation a Dominant Strategy in the U.S. Postal Service

Abstract

This paper asserts that game theory can be a valuable tool in dispute system design efforts. The premise is simple: If different dispute system designs have different impacts on the decisions and behaviors of participants, then game theory can be used to help logically think through the relationships among program design, participation, and outcomes. This paper retrospectively applies game theory to the United States Postal Service (USPS) employment mediation program REDRESS(R) to demonstrate how game theory can be used during the diagnosis and design stages of dispute system design. Although the USPS did not use game theory in their design efforts per se, they did deliberately and strategically design REDRESS(R) to alter the preferences of craft employees for litigation and mediation. By purposefully addressing the stages and elements of dispute system design, the USPS was able to change the dominant strategy of craft employees, thereby making mediation, not litigation, the Nash Equilibrium.

Keywords: Game theory, mediation, dispute resolution

JEL Classification: C7, J52