IDEAS home Printed from https://ideas.repec.org/a/kap/regeco/v28y2005i1p23-46.html

A Model of Final Offer Arbitration in Regulation

Author

Listed:
  • JUAN-PABLO MONTERO

Abstract

I study a regulatory process in which both the regulator and the regulated firm propose prices that, in case of disagreement, are settled through final-offer arbitration (FOA)—a practice currently used in Chile for setting prices in the water sector. Rather than submitting a single offer, each party simultaneously submits an offer for each of the firm’s cost units (e.g., cost of raw water, capital cost). While a multiple-offers scheme allow the arbitrator to better approximate her ideal settlement, it may induce parties to submit widely divergent offers. This divergence, however, does not affect the arbitrator’s ability to learn from the offers. Copyright Springer Science+Business Media, Inc. 2005

Suggested Citation

  • Juan-Pablo Montero, 2005. "A Model of Final Offer Arbitration in Regulation," Journal of Regulatory Economics, Springer, vol. 28(1), pages 23-46, July.
    • Handle: RePEc:kap:regeco:v:28:y:2005:i:1:p:23-46
    DOI: 10.1007/s11149-005-2354-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11149-005-2354-y
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11149-005-2354-y?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
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Gibbons, Robert, 1988. "Learning in Equilibrium Models of Arbitration," American Economic Review, American Economic Association, vol. 78(5), pages 896-912, December.
    2. 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.
    3. Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-1433, November.
    4. 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.
    5. James J. Anton & Dennis A. Yao, 1992. "Coordination in Split Award Auctions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(2), pages 681-707.
    6. James J. Anton & Dennis A. Yao, 1989. "Split Awards, Procurement, and Innovation," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 538-552, Winter.
    7. Teeples, Ronald K & Glyer, David, 1987. "Cost of Water Delivery Systems: Specification and Ownership Effects," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 399-408, August.
    8. Vogelsang, Ingo, 2002. "Incentive Regulation and Competition in Public Utility Markets: A 20-Year Perspective," Journal of Regulatory Economics, Springer, vol. 22(1), pages 5-27, July.
    9. 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.
    10. Henry S. Farber & Max H. Bazerman, 1989. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(1), pages 99-120.
    11. José Miguel Sánchez & Jessica Coria, 2003. "Using a Hypothetical-Efficient Firm to Benchmark Water Utilities in Chile," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 566-576.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gustavo Ferro & Omar O. Chisari, 2010. "Tópicos de Economía de la Regulación de los Servicios Públicos," Working Papers hal-00473038, HAL.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Juan-Pablo Montero, 2004. "A Model of Arbitration in Regulation," Documentos de Trabajo 267, Instituto de Economia. Pontificia Universidad Católica de Chile..
    2. Armstrong, Michael J. & Hurley, W. J., 2002. "Arbitration using the closest offer principle of arbitrator behavior," Mathematical Social Sciences, Elsevier, vol. 43(1), pages 19-26, January.
    3. Orley Ashenfelter & Gordon B. Dahl, 2003. "Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents An Empirical Study of Final-Offer Arbitration," Working Papers 857, Princeton University, Department of Economics, Industrial Relations Section..
    4. Orley Ashenfelter & Gordon Dahl, 2003. "Strategic Bargaining Behavior, Self-Serving Biases, and the Role of Expert Agents An Empirical Study of Final-Offer Arbitration," Working Papers 857, Princeton University, Department of Economics, Industrial Relations Section..
    5. Marselli, Riccardo & McCannon, Bryan C. & Vannini, Marco, 2015. "Bargaining in the shadow of arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 356-368.
    6. Charness, Gary & Kuhn, Peter, 2011. "Lab Labor: What Can Labor Economists Learn from the Lab?," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 3, pages 229-330, Elsevier.
    7. Orley C. Ashenfelter & David E. Bloom & Gordon B. Dahl, 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game: Evidence from Long Run Play," NBER Working Papers 18834, National Bureau of Economic Research, Inc.
    8. Ashenfelter, Orley, et al, 1992. "An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems," Econometrica, Econometric Society, vol. 60(6), pages 1407-1433, November.
    9. Wojciech Olszewski, 2011. "A Welfare Analysis of Arbitration," American Economic Journal: Microeconomics, American Economic Association, vol. 3(1), pages 174-213, February.
    10. Orley Ashenfelter & David E. Bloom & Gordon B. Dahl, 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(3), pages 399-423, September.
    11. Alan Speight & Dennis Thomas, 1997. "Arbitrator Decision‐Making in the Transfer Market: an Empirical Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(2), pages 198-215, May.
    12. Gabuthy, Yannick & Jacquemet, Nicolas & Marchand, Nadège, 2008. "Does resorting to online dispute resolution promote agreements? Experimental evidence," European Economic Review, Elsevier, vol. 52(2), pages 259-282, February.
    13. Klement, Alon & Neeman, Zvika, "undated". "Does Information about Arbitrators’Win/Loss Ratios Improve Their Accuracy?," Foerder Institute for Economic Research Working Papers 275786, Tel-Aviv University > Foerder Institute for Economic Research.
    14. David Dickinson, 2005. "Bargaining Outcomes with Double-Offer Arbitration," Experimental Economics, Springer;Economic Science Association, vol. 8(2), pages 145-166, June.
    15. David S. Kaplan & Joyce Sadka & Jorge Luis Silva‐Mendez, 2008. "Litigation and Settlement: New Evidence from Labor Courts in Mexico," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 5(2), pages 309-350, June.
    16. Dickinson, David L., 2006. "The chilling effect of optimism: The case of final-offer arbitration," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 35(1), pages 17-30, February.
    17. repec:vuw:vuwscr:19179 is not listed on IDEAS
    18. Klement, Alon & Neeman, Zvika, 2011. "Private Selection and Arbitration Neutrality," Working Paper Series 19179, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    19. Henry S. Farber, 2001. "Notes on the Economics of Labor Unions," Working Papers 831, Princeton University, Department of Economics, Industrial Relations Section..
    20. Armstrong, Mark & Sappington, David E.M., 2007. "Recent Developments in the Theory of Regulation," Handbook of Industrial Organization, in: Mark Armstrong & Robert Porter (ed.), Handbook of Industrial Organization, edition 1, volume 3, chapter 27, pages 1557-1700, Elsevier.
    21. Nathalie Chappe, 2001. "L'analyse économique d'un mode de résolution des litiges : l'arbitrage," Revue Française d'Économie, Programme National Persée, vol. 15(4), pages 187-208.

    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:kap:regeco:v:28:y:2005:i:1:p:23-46. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc 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 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.