IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v32y1986i10p1346-1355.html
   My bibliography  Save this article

Binding Versus Final-Offer Arbitration: A Combination is Best

Author

Listed:
  • Steven J. Brams

    (Department of Politics, New York University, New York, New York 10003)

  • Samuel Merrill, III

    (Department of Mathematics and Computer Science, Wilkes College, Wilkes-Barre, Pennsylvania 18766)

Abstract

A new procedure is proposed for settling disputes which combines binding arbitration (BA) and final-offer arbitration (FOA). Unlike either of the two pure procedures, combined arbitration (CA) induces the two parties to converge in making their final offers. Under BA, the arbitrator's settlement is binding on the two sides; under FOA, the arbitrator chooses the final offer of the party closer to what he/she considers a fair settlement. Under CA, FOA is used if the arbitrator's notion of a fair settlement falls between the two final offers or if the final offers converge or crisscross; otherwise, BA is used. When modeled as a two-person, zero-sum game of imperfect information, in which the two parties make final offers to maximize their expected payoffs---based on their perception of the arbitrator's probability distribution of fair settlements---convergence is to the median and constitutes a global equilibrium if the probability distribution is continuous, unimodal, and symmetric about the median. When the distribution is not symmetric or the two parties have different distributions, alternative solutions are derived---including one based on the parties' being within a "critical distance" of each other---and illustrated by examples. Alternatives to the arbitrator's decision calculus are considered, and questions about applying the new arbitration procedure are discussed.

Suggested Citation

  • 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.
  • Handle: RePEc:inm:ormnsc:v:32:y:1986:i:10:p:1346-1355
    DOI: 10.1287/mnsc.32.10.1346
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.32.10.1346
    Download Restriction: no

    File URL: https://libkey.io/10.1287/mnsc.32.10.1346?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:32:y:1986:i:10:p:1346-1355. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.