According to the current social contradictions in rural grass roots and results of surveys,this paper used the cost and profit theory to unscramble the move of various mechanism of settlements,such as reconciliation,conciliation,litigation and letter petition with law and economics analysis methods and the rational man premise.The law and economics analysis reveals the questions in the move of mechanism in settlements of social contradictions in rural grass roots as below:litigation has been the last choice; the parties are too dependent on reconciliation and conciliation; letter petition is unpractical.The paper also clarified the underlying reasons such as,the higher cost of litigation; lack of executive force results in the risk of lower income from reconciliation and conciliation; unbalanced cost- benefit of letter petition leads to the worse choice by peasants.All the analysis above contributed to the final proposal of building a multi- dimensional mechanism of settlement of social contradictions to benefit rural grass roots at the lowest cost.Firstly,reconciliation and conciliation are adopted against part of the small- scale family dispute over marriage and inheritance,and debt dispute; secondly,reconciliation can be firstly used to deal with high benefit cases like land and contractual operation before litigation comes into use; thirdly,litigation can be mainly used ainst evil power in rural area.At last,letter petition can be chosen in case of no alternative.