Abstract
A dispute occurs when one person makes a claim on another who rejects it. In a dispute each person has an interest (in the stolen boots affair, the miner has an interest in boots and the firm has an interest in miners working). Interests are the things one cares about or wants. Interest-based negotiation = problem-solving negotiation: treating a dispute as a mutual problem to be solved by the parties. Resolving such a problem can be accomplished by diminishing the hostility. This solution tends to generate a higher level of mutual satisfaction, better relationships and less recurrence resulting in less transaction costs. Disputes may be resolved by determining who is right. It is difficult to rely on some independent standard, with legitimacy as rights are rarely clear. Parties can turn to a third party to determine who is right. In this resolving solution there is a loser, because it turns into a competition between the parties. Yet, it is less costly than a power approach. In a power approach, a conflict is resolved by determining who is the more powerful. Ex: sabotage, physical attack, or employee strike. In a conflict, it difficult to determine who is more powerful, as this depends on individual perception. The process costs more due to resources consumed and opportunities lost, and lead to greater recurrence. In resolving a dispute the focus may shift from interests to rights and then to power because even if a party wins a court judgment, the dispute can continue. Sometimes, a party decides to withdraw from the dispute, because he thinks it is not in his interest to continue or because he thinks he is not powerful enough to continue. This is called ?Lumping it'. When a party decides to withdraw by quitting the organization, divorcing or staying out of the other party's way, it is called avoidance. Which is the best solution from the point of view of transaction costs, because of the satisfaction with outcomes, concerns the fairness of the resolution, because of the effect on a relationship, and because of the durability of the solution found? These 4 criteria are called the total costs of a dispute.
