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How emotional and economic losses impact mediation results

A study by the University of Chicago has examined the ways in which humans react to and evaluate different types of loss. The research finds that humans value emotional and economic loss differently when these losses are considered separately versus when they are considered in combination with each other. These different valuing systems lead to different outcomes in mediation.

Let’s say for example you live in an old apartment. Your building’s plumbing system has been around since FDR was president, and it’s in dire need of repair. Your landlord decides to completely re-do the piping—a massive project, which leaves you without running water for two weeks. Your apartment is unlivable. When you complain to your landlord about paying rent for an uninhabitable space, he becomes verbally abusive and threatening. You become concerned for your safety. Ultimately, you decide to move to a different apartment.

In the above scenario, you experienced economic loss by paying two weeks’ rent for an apartment you couldn’t live in, and for the motel stayed in as a result. You also experienced emotional loss from your landlord’s threatening behavior—which ultimately forced you to move.

According to the study, economic loss is easy to attach a numerical value to. In the above example of economic loss, a mediator would be likely to award compensation to the victim for the equivalent of two weeks’ rent and the motel bill during this period. Emotional loss, however, is harder to gauge. The way we value this type of loss is not rooted in numbers but rather based on our psychological response.

Due to this disparity, researchers discovered that when a claim involves both economic and emotional loss together, mediators have a tendency to disregard the emotional loss component and instead anchor their compensation valuation solely on the economic loss. The research suggests that in such cases, if the victim’s economic loss is low compared to their emotional suffering , they would be better compensated if their claim focuses only on the emotional loss.

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