Making Peace and Making Money: Economic Analysis of the Market for Mediators in Private Practice

Published in paper form in Albany Law Review, Vol. 72, pp. 257-291 (2009).

There has been virtually no empirical or theoretical research about the markets for mediation services and for providers of those services: how many there are, who they are, and what they have in common. This article is an attempt to fill the void.

The article presents data that the supply of willing mediators by far exceeds the demand for their services, and suggests possible economic explanations for the excess entry, including overoptimism and the lack of formal barriers to entry. Excess entry is socially suboptimal: many aspirant mediators spend money pursuing what is likely an illusory career and forego other career options, even though they were never going to be able to make money as mediators. The article also presents data that income distribution in uneven in the market for private mediation and suggests that the market is a winner-take-all market. It proposes economic causes that contribute to this phenomenon: non-homogeneity of the product (i.e., mediation services), de facto barriers to entry, including mediator selection preferences and specialization, organizational structures, and inelastic demand for mediator services. The lack of objective measures of mediator quality, other than settlement rates, further contributes to reputation becoming the most important factor predicting mediator success.

The analysis has important implications for aspirant mediators and for the design of mediation training programs. Aspirant mediators would be well-advised to specialize in a particular field, such as environmental issues or construction, and gain a solid reputation among lawyers and/or business people in that field before starting a mediation career. Mediation training programs ought to be redesigned to convey to aspirant mediators the realities of mediation practice. Suggested Citation

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Urška Velikonja

J.D. Harvard 2009, LL.M. Harvard 2003, LL.B. Univ. of Ljubljana 2002. I have been a teaching fellow for the Economics Department at Harvard University from 2007 to present. I will be a Visiting Assistant Professor at Arizona State University Sandra Day O'Connor College of Law starting in August 2009. MORE >