Mediation through the Lens of Transaction Cost Economics: Subject Field and Policy Implications

Based on the application of the conceptual core of the economic theory of transaction costs, an explanation is offered of the grounds and possibilities of using mediation in economic disputes as a way to ensure the stability of contracts and continuity of transactions in value chains. The place of mediation among alternative mechanisms of transaction management in the spectrum between the hierarchical and market mechanisms is explained using the conceptual schemes of O. Williamson and C. Menard. The paper shows how mediation differs from involving a third party in transactions and why mediation is most appropriate and in demand for maintaining hybrid institutional agreements, which in this case can be ensured by bilateral mechanisms of transaction management. The paper also shows why the participation of mediators in dispute resolution is not a special case of a trilateral transaction management mechanism, but can be attributed to bilateral mechanisms, despite the independence of mediators from the parties to the dispute. Approaches to determining the economic effects of mediation and identifying the limits of the mediator's competence are disclosed. The role, functions and competences of mediators are considered in the context of problems caused by the incompleteness of concluded contracts. The role of diffuse (in the understanding of F. Hayek) and tacit knowledge and their combination as sources of the need for mediation is emphasized. A description of structural alternatives to mediation is proposed, including voluntary and compulsory mediation in their various forms. It is shown that one of the main problems of voluntary mediation as an element of a hybrid transaction management mechanism is enforcement of the agreements reached. This problem can be solved in various ways, including by switching to mandatory mediation. The experience of using mandatory mediation in antitrust regulation is considered. Issues for further economic research of the new subject area are presented in the context of the economic theory of transaction costs. The article was written on the basis of the RANEPA state assignment research programme.