Conflict resolution role of mediation in labor disputes in Turkey Evidence from a signaling game
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Purpose This paper aims to manage better the conflicts in labor disputes by improving the understanding of mediation dynamics from a game-theoretical perspective. Design/methodology/approach Signaling game model is adapted to a hypothetical labor dispute based on the legislative regulations on the mandatory mediation system in Turkey. Findings The paper determines mediation equilibria in which both players get positive payoffs. Analysis of the mediation equilibria helps to improve the understanding about the litigation and mediation dynamics depending on the variables. The variables are clearly separated from each other due to their reverse effects on strategy choices of the parties. Mediation payoff and litigation cost are characterized by their incentive effects on mediation preferences, whereas mediation fee and litigation payoff are characterized by their disincentive effect. While increasing amounts of incentive variables strengthen the mediation tendency of the employee, increasing amounts of disincentive variables reveal the opposite effect. Furthermore, the analysis also indicates that if the litigation payoff is too small to recover litigation costs, accepting the mediation becomes the optimal strategy. This prediction is contrary to that of traditional game-theoretic litigation/settlement models, in which small-claim disputes typically cannot be settled. Practical implications - The assumption that the mediation fee is not a part of the litigation cost eliminates the disincentive effect of mediation fee and makes it neutral on the strategy choice of employee. Originality/value This paper first analyzes the strategic role of mediation in labor disputes by using a signaling game. Despite its mediation focus, the paper also provides practical insights for litigation.