Bargaining Outcomes with Double-Offer Arbitration
Increasingly, 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 disputantsâ€™ 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 â€œdouble-offerâ€ 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 arbitratorâ€™s preferred settlement distribution. Because the procedureâ€™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 â€œnarcotic effect.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
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- 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.
- Ashenfelter, Orley, et al, 1992.
"An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems,"
Econometric Society, vol. 60(6), pages 1407-33, November.
- 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.
- Ashenfelter, O. & Currie, J. & Farber, H.S., 1990. "An Experimental Comparison Of Dispute Rates In Alternative Arbritation Systems," Working papers 562, Massachusetts Institute of Technology (MIT), Department of Economics.
- 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..
- 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.
- 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.
- 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.
- 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.
- 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.
- David Dickinson, .
"A comparison of conventional, final offer, and combined arbitration for dispute resolution,"
2001-04, Utah State University, Department of Economics.
- 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.
- 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.
- 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.
- Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-59, February.
- Henry S. Farber & Max H. Bazerman, 1987. "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.
- 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.
When requesting a correction, please mention this item's handle: RePEc:kap:expeco:v:8:y:2005:i:2:p:145-166. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn)or (Christopher F. Baum)
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.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.