Bargaining Outcomes with Double-Offer Arbitration
AbstractIncreasingly, arbitration is becoming used to resolve bargaining disputes in a variety of settings. Reducing dispute rates is often listed as a main goal in designing arbitration mechanisms. Conventional arbitration and final-offer arbitration are two commonly used procedures, but theoretical examinations of these arbitration procedures show that disputantsÃ¢â¬â¢ final bargaining positions do not converge and disagreement is likely. This article contains results from a set of experiments designed to compare bargaining outcomes under the two commonly used arbitration procedures with outcomes under an innovative procedure called Ã¢â¬Ådouble-offerÃ¢â¬ arbitration (Zeng et al., 1996). This procedure requires that disputants make two final offers at impasse: a primary and a secondary offer. The arbitrator evaluates the pairs of offers using a linear criterion function, and theory suggests the secondary offers converge to the median of the arbitratorÃ¢â¬â¢s preferred settlement distribution. Because the procedureÃ¢â¬â¢s rules are that convergence of offers generates a settlement at those offers, this theoretical convergence result implies that arbitration is not needed in the end. Experimental results indicate that dispute rates in double-offer arbitration are, on average, about the same as dispute rates in conventional arbitration. However, other results show reason to favor double-offer arbitration. Specifically, in repeated bargaining, there is concern over whether use of an arbitration procedure becomes addictive and makes bargainers more likely to use the procedure in the future-a Ã¢â¬Ånarcotic effect.Ã¢â¬ The data show that double-offer arbitration is non-addictive, whereas both conventional and final-offer arbitration are. Copyright Springer Science + Business Media, Inc. 2005
Download InfoTo our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Bibliographic InfoPaper provided by Department of Economics, Appalachian State University in its series Working Papers with number 04-19.
Date of creation: 2004
Date of revision:
Contact details of provider:
Postal: Thelma C. Raley Hall, Boone, North Carolina 28608
Web page: http://www.business.appstate.edu/departments/economics/
More information through EDIRC
Other versions of this item:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-59, February.
- Brams, Steven J. & Merrill, Samuel III, 1984.
"Binding Versus Final-Offer Arbitration: A Combination is Best,"
84-07, C.V. Starr Center for Applied Economics, New York University.
- Steven J. Brams & Samuel Merrill, III, 1986. "Binding Versus Final-Offer Arbitration: A Combination is Best," Management Science, INFORMS, vol. 32(10), pages 1346-1355, October.
- Ashenfelter, O. & Currie, J. & Farber, H.S., 1990.
"An Experimental Comparison Of Dispute Rates In Alternative Arbritation Systems,"
562, Massachusetts Institute of Technology (MIT), Department of Economics.
- Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-33, November.
- Orley Ashenfelter & Janet Currie & Henry S. Farber & Matthew Spiegel, 1990. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," NBER Working Papers 3417, National Bureau of Economic Research, Inc.
- Orley Ashenfelter & Janet Currie & Henry S. Farber & Matthew Spiegel, 1990. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Working Papers 647, Princeton University, Department of Economics, Industrial Relations Section..
- Ashenfelter, O. & Currie, J. & Farber, H.S. & Spiegel, M., 1990. "An Experimental Comparison Of Dispute Rates In Alternative Arbitration Systems," Papers 55, Princeton, Woodrow Wilson School - Discussion Paper.
- David Dickinson, 2003.
"Expectations and Comparative Arbitration Institutions,"
2003-02, Utah State University, Department of Economics.
- David Dickinson, 2004. "Expectations and Comparative Arbitration Institutions," Working Papers 04-22, Department of Economics, Appalachian State University.
- David L. Dickinson, 2004.
"A comparison of conventional, final-offer, and "combined" arbitration for dispute resolution,"
Industrial and Labor Relations Review,
ILR Review, Cornell University, ILR School, vol. 57(2), pages 288-301, January.
- David Dickinson, . "A comparison of conventional, final offer, and combined arbitration for dispute resolution," Working Papers 2001-04, Utah State University, Department of Economics.
- Richard J. Butler & Ronald G. Ehrenberg, 1981. "Estimating the narcotic effect of public sector impasse procedures," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(1), pages 3-20, October.
- Linda Babcock & George Loewenstein, 1997. "Explaining Bargaining Impasse: The Role of Self-Serving Biases," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 109-126, Winter.
- Farber, Henry S & Bazerman, Max H, 1989. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes," The Quarterly Journal of Economics, MIT Press, vol. 104(1), pages 99-120, February.
- Babcock, Linda & Wang, Xianghong & Lowenstein, George, 1996. "Choosing the Wrong Pond: Social Comparisons in Negotiations That Reflect a Self-Serving Bias," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 1-19, February.
- Steven J. Brams & Samuel Merrill, III, 1983. "Equilibrium Strategies for Final-Offer Arbitration: There is no Median Convergence," Management Science, INFORMS, vol. 29(8), pages 927-941, August.
- Bolton, Gary E. & Katok, Elena, 1998. "Reinterpreting Arbitration's Narcotic Effect: An Experimental Study of Learning in Repeated Bargaining," Games and Economic Behavior, Elsevier, vol. 25(1), pages 1-33, October.
- Pecorino, Paul & Van Boening, Mark, 2001. "Bargaining and Information: An Empirical Analysis of A Multistage Arbitration Game," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 922-48, October.
- Henry S. Farber & Max H. Bazerman, 1989. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes."," NBER Working Papers 2139, National Bureau of Economic Research, Inc.
- Charness, Gary & Kuhn, Peter, 2011.
"Lab Labor: What Can Labor Economists Learn from the Lab?,"
Handbook of Labor Economics,
- Charness, Gary & Kuhn, Peter J., 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," IZA Discussion Papers 4941, Institute for the Study of Labor (IZA).
- Gary Charness & Peter J. Kuhn, 2010. "Lab Labor: What Can Labor Economists Learn from the Lab?," NBER Working Papers 15913, National Bureau of Economic Research, Inc.
- Deck, Cary A. & Farmer, Amy, 2009. "Strategic bidding and investments in final offer arbitration: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 361-373, May.
- David Dickinson & Lynn Hunnicutt, 2010. "Nonbinding recommendations: the relative effects of focal points versus uncertainty reduction on bargaining outcomes," Theory and Decision, Springer, vol. 69(4), pages 615-634, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (O. Ashton Morgan).
If references are entirely missing, you can add them using this form.