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Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes."

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Author Info
Henry S. Farber
Max H. Bazerman
Abstract

One prominent explanation for disagreement in bargaining is that the parties have divergent and relatively optimistic expectations regarding the ultimate outcome if they fail to agree. The fact that settlement rates are much higher where final-offer arbitration is the dispute settlement procedure than where conventional arbitration is the dispute settlement procedure is used as the basis of a test of the role of divergent expectations in causing disagreement in negotiations. Calculations of identical-expectations contract zones using existing estimates of models of arbitrator behavior yield larger identical-expectations contract zones in conventional arbitration than in final-offer arbitration. This evidence clearly suggests that divergent expectations alone are not an adequate explanation of disagreement in labor-management negotiations. A number of alternative explanations for disagreement are suggested and evaluated.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2139.

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Date of creation: Aug 1989
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Handle: RePEc:nbr:nberwo:2139

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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.:
  1. Henry S. Farber & Harry C. Katz, 1979. "Interest arbitration, outcomes, and the incentive to bargain," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 33(1), pages 55-63, October.
  2. John H. Pencavel, 1982. "The Trade-Off between Wages and Employment in Trade Union Objectives," NBER Working Papers 0870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Bloom, David E & Cavanagh, Christopher L, 1986. "An Analysis of the Selection of Arbitrators," American Economic Review, American Economic Association, vol. 76(3), pages 408-22, June. [Downloadable!] (restricted)
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  4. Joseph S. Tracy, 1986. "An Empirical Test of an Asymmetric Information Model of Strikes," NBER Working Papers 1870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-81, December. [Downloadable!] (restricted)
  6. Freeman, Richard B, 1986. "Unionism Comes to the Public Sector," Journal of Economic Literature, American Economic Association, vol. 24(1), pages 41-86, March. [Downloadable!] (restricted)
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  7. Bloom, David E, 1986. "Empirical Models of Arbitrator Behavior under Conventional Arbitration," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 578-85, November. [Downloadable!] (restricted)
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  8. Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Blackwell Publishing, vol. 50(2), pages 221-47, April. [Downloadable!] (restricted)
  9. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June. [Downloadable!] (restricted)
  10. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S40-S87, June. [Downloadable!] (restricted)
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  11. Carruth, Alan A & Oswald, Andrew J, 1985. "Miners' Wages in Post-war Britain: An Application of a Model of Trade Union Behaviour," Economic Journal, Royal Economic Society, vol. 95(380), pages 1003-20, December. [Downloadable!] (restricted)
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  12. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-37, May. [Downloadable!] (restricted)
  13. Max H. Bazerman & Henry S. Farber, 1985. "Arbitrator decision making: When are final offers important?," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 39(1), pages 76-89, October.
  14. Max H. Bazerman, 1985. "Norms of distributive justice in interest arbitration," Industrial and Labor Relations Review, ILR Review, ILR School, Cornell University, vol. 38(4), pages 558-570, July.
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(explanations, 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.)

  1. Juan Pablo Montero, 2004. "A Model of Arbitration in Regulation," Documentos de Trabajo 267, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
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  2. Murphy, James & Dinar, Ariel & Howitt, Richard & Mastrangelo, Erin & Rassenti, Stephen & Smith, Vernon, 2002. "Mechanisms For Addressing Third-Party Impacts Resulting From Voluntary Water Transfers," 2002 Annual meeting, July 28-31, Long Beach, CA 19812, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  3. Raquel Fernandez & Jacob Glazer, 1989. "Striking for a Bargain Between Two Completely Informed Agents," NBER Working Papers 3108, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Juan Pablo Montero, 2004. "Learning in Final-Offer Arbitration with Multiple Offers," Documentos de Trabajo 270, Instituto de Economía. Pontificia Universidad Católica de Chile.. [Downloadable!]
  5. David Dickinson, 2005. "Bargaining Outcomes with Double-Offer Arbitration," Experimental Economics, Springer, vol. 8(2), pages 145-166, June. [Downloadable!] (restricted)
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  6. repec:fth:prinin:267 is not listed on IDEAS
  7. Cary Deck & Amy Farmer & Dao-Zhi Zeng, 2007. "Amended final-offer arbitration over an uncertain value: A comparison with CA and FOA," Experimental Economics, Springer, vol. 10(4), pages 439-454, December. [Downloadable!] (restricted)
  8. Orley Ashenfelter & Gordon B. Dahl, 2005. "Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration," NBER Working Papers 11189, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. repec:fth:prinin:260 is not listed on IDEAS
  10. 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. [Downloadable!] (restricted)
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  11. Arnoud W.A. Boot & Anjan V. Thakor, 2003. "The Economic Value of Flexibility when there is Disagreement," Tinbergen Institute Discussion Papers 03-002/2, Tinbergen Institute. [Downloadable!]
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