Efficiency of Online Dispute Resolution : A Case Study

The emergence of the Internet as a commercial phenomenon has resulted in an explosion of interest in Online Dispute Resolution. Online Dispute Resolution (ODR) consists of a variety of settlement methods which use the electronic environment to resolve conflicts. The aim of the paper is to evaluate the economic performance of a specific process elaborated by one of the main companies in the ODR world: Cybersettle. Cybersettle is a technology-administrated process in which an automated algorithm evaluates bids from the parties and settles the case if the offers are within a prescribed range. While Cybersettle offers an interesting alternative to the legal recourse, our analysis shows that the proposed settlement system plagues human interaction and creates some crucial inefficiencies. The implications of these results are then used to discuss the competition on the market for electronic justice and the potential role of reputation mechanisms