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Bargaining and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration

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Author Info

  • Orley Ashenfelter

    (Princeton University)

  • Gordon B. Dahl

    (University of California, San Diego)

Abstract

Expert agents, such as lawyers, play a prominent role in conflict resolution, yet little is known about how they affect outcomes. We construct a model that permits us to estimate the influence of agents and test whether the parties in a dispute face prisoner's dilemma incentives. Using eighteen years of final-offer arbitration data from New Jersey, we find the parties do significantly better when they retain agents and that the parties learn about this benefit over time. However, we also find that the gain to using an agent is fully offset when the opposing party also hires an agent. Since agents are costly, this noncooperative equilibrium is Pareto inferior. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 1 (February)
Pages: 116-132

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Handle: RePEc:tpr:restat:v:94:y:2012:i:1:p:116-132

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Web page: http://mitpress.mit.edu/journals/

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Cited by:
  1. Conlin, Michael & Orsini, Joe & Tang, Meng-Chi, 2013. "The effect of an agent’s expertise on National Football League contract structure," Economics Letters, Elsevier, vol. 121(2), pages 275-281.
  2. Martin Halla, 2007. "Divorce and the Excess Burden of Lawyers," Economics working papers 2007-13, Department of Economics, Johannes Kepler University Linz, Austria.
  3. R. Marselli & M. Vannini & BC. McCannon, 2013. "Bargaining in the Shadow of Arbitration," Working Paper CRENoS 201309, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  4. Henri Fraisse, 2010. "Labour Disputes and the Game of Legal Representation," CESifo Working Paper Series 3084, CESifo Group Munich.

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