Abstract

In many cases collectively desirable projects can be carried out only after considerable social conflict because the unequal distribution of burden and benefit from such projects leads to local opposition. From an economic perspective this problem can be resolved by compensating those who are negatively affected, Using a fictitious example, the author demonstrates that compensation packages will increase the collective welfare, have a positive redistributive effect, and contribute to unblocking negotiation standstills that result from local veto, In actual practice, however, compensation offers will often be rejected by those affected. In order to increase the acceptability of compensation, it is important that all the possibilities to limit and restitute damage be explored before consideration is given to acceptable forms of substitution or compensation, The search for adequate means of substitution and compensation requires the inclusion of all parties affected. Therefore alternative dispute resolution provides an ideal framework for such a process