A Welfare Analysis of Arbitration
The paper compares conventional and final-offer arbitration. One party is supposed to make a payment to another party, whose amount depends on a state. Under one scenario, parties obtain signals about the state, which cannot be recognized by the opponents. If the arbitrator's ability of recognizing signals is high, the frequency of requesting arbitration is lower under conventional than under final-offer arbitration. If this ability is low, final-offer arbitration dominates conventional arbitration in quite a similar sense. Under the second scenario, parties believe that their opponents have wrong signals. Then, conventional arbitration approximates the original outcome better than final-offer arbitration. (JEL C78, D82, D86, J52)
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Volume (Year): 3 (2011)
Issue (Month): 1 (February)
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References listed on IDEAS
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- Amy Farmer & Paul Pecorino, 2003. "Bargaining with Voluntary Transmission of Private Information: Does the Use of Final Offer Arbitration Impede Settlement?," Journal of Law, Economics and Organization, Oxford University Press, vol. 19(1), pages 64-82, April.
- Gibbons, Robert, 1988.
"Learning in Equilibrium Models of Arbitration,"
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American Economic Association, vol. 78(5), pages 896-912, December.
- Robert Gibbons, 1988. "Learning In Equilibrium Models of Arbitration," NBER Working Papers 2547, National Bureau of Economic Research, Inc.
- Robert Gibbons, 1988. "Learning in Equilibrium Models of Arbitration," Working papers 485, Massachusetts Institute of Technology (MIT), Department of Economics.
- Farber, Henry S & Bazerman, Max H, 1986. "The General Basis of Arbitrator Behavior: An Empirical Analysis of Conventional and Final-Offer Arbitration," Econometrica, Econometric Society, vol. 54(6), pages 1503-1528, November.
- repec:fth:prinin:219 is not listed on IDEAS
- 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.
- Brams, Steven J. & Merrill, Samuel III, 1984. "Binding Versus Final-Offer Arbitration: A Combination is Best," Working Papers 84-07, C.V. Starr Center for Applied Economics, New York University.
- Orley Ashenfelter, 1987. "Arbitrator Behavior," Working Papers 599, Princeton University, Department of Economics, Industrial Relations Section..
- Farber, Henry S & Bazerman, Max H, 1986. "The General Basis of Arbitrator Behavior: An Empirical Analysis of Conventional and Final-Offer Arbitration," Econometrica, Econometric Society, vol. 54(4), pages 819-844, July.
- 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.
- Farmer, Amy & Pecorino, Paul, 1998. "Bargaining with Informative Offers: An Analysis of Final-Offer Arbitration," The Journal of Legal Studies, University of Chicago Press, vol. 27(2), pages 415-432, June.
- Henry S. Farber & Harry C. Katz, 1979. "Interest Arbitration, Outcomes, and the Incentive to Bargain," ILR Review, Cornell University, ILR School, vol. 33(1), pages 55-63, October. Full references (including those not matched with items on IDEAS)
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