Economic Analysis of Negotiation for the Settlement of Commercial Disputes

On commercial contracts, firstly, parties agree to resolve their disputes through amicable negotiations before referring to an arbitrator or the judiciary in a bid to settle their disputes at the lowest possible cost as well as in the shortest possible time and also the least possible damage to their commercial relationship. From the perspective of economic analysis, negotiation is considered as an economic behavior that parties with regard to its results, perform cost and benefit analysis as well as organize their behavior in a bid to achieve maximum benefits as well as resolve their disputes.The main question which is raised in this paper is whether the initial settlement of disputes through negotiation is consisted with economic basis or not. The following hypothesis which is proposed is that the peaceful settlement of disputes (negotiation) not only is complied with the economic theories but also is strongly consistent with the economic formulas such as cost-benefit, efficiency and welfare