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A comparison of conventional, final offer, and combined arbitration for dispute resolution

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  • David Dickinson

Abstract

This paper presents results from a controlled laboratory study of bargaining behavior and dispute rates under three types of arbitration procedures. Two of these—conventional and final-offer arbitration—are commonly used in practice, while an innovative procedure called “Combined Arbitration” (Brams and Merrill 1986) is not currently used. Combined Arbitration combines the rules of the two most commonly used forms of binding arbitration (conventional and final-offer arbitration) in such a way as to generate convergent final offers in theory. Controlled laboratory results show, however, that disputes are most likely in Combined Arbitration and least likely in conventional arbitration. These results challenge the theoretical predictions of Combined Arbitration as well as the hypothesis that final-offer arbitration would be more likely to reduce disputes compared to conventional arbitration. The results may be consistent with the hypothesis that disputants are relatively optimistic about the arbitrator’s notion of a fair settlement. Implications of these findings are also discussed.

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File URL: ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2001-04.pdf
File Function: First version, 2001
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Bibliographic Info

Paper provided by Utah State University, Department of Economics in its series Working Papers with number 2001-04.

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Length: 32 pages
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Handle: RePEc:usu:wpaper:2001-04

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Keywords: dispute resolution; arbitration; bargaining; experiments;

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Cited by:
  1. Kimbrough, Erik & Sheremeta, Roman & Shields, Timothy, 2013. "When Parity Promotes Peace: Resolving Conflict Between Asymmetric Agents," MPRA Paper 52922, University Library of Munich, Germany.
  2. David Dickinson, 2009. "The Effects of Beliefs Versus Risk Attitude on Bargaining Outcomes," Theory and Decision, Springer, vol. 66(1), pages 69-101, January.
  3. Yannick Gabuthy & Nadège Marchand, 2003. "Does Resorting to Online Dispute Resolution Promote Agreements ? Experimental Evidence," Post-Print halshs-00178587, HAL.
  4. 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.
  5. David Dickinson, 2005. "Bargaining Outcomes with Double-Offer Arbitration," Experimental Economics, Springer, vol. 8(2), pages 145-166, June.
  6. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, Elsevier.
  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.
  8. 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.

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