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Bargaining and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration

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  • Orley Ashenfelter

    (Princeton University)

  • Gordon B. Dahl

    (University of California, San Diego)

Abstract

Expert agents, such as lawyers, play a prominent role in conflict resolution, yet little is known about how they affect outcomes. We construct a model that permits us to estimate the influence of agents and test whether the parties in a dispute face prisoner's dilemma incentives. Using eighteen years of final-offer arbitration data from New Jersey, we find the parties do significantly better when they retain agents and that the parties learn about this benefit over time. However, we also find that the gain to using an agent is fully offset when the opposing party also hires an agent. Since agents are costly, this noncooperative equilibrium is Pareto inferior. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Orley Ashenfelter & Gordon B. Dahl, 2012. "Bargaining and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 116-132, February.
  • Handle: RePEc:tpr:restat:v:94:y:2012:i:1:p:116-132
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    References listed on IDEAS

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    Cited by:

    1. Joshua Hall & Amanda Ross & Christopher Yencha, 2015. "The political economy of the Essential Air Service program," Public Choice, Springer, pages 147-164.
    2. 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.
    3. Juranek, Steffen, 2015. "Investing in legal advice - What determines the costs of enforcing intellectual property rights?," Discussion Papers 2015/20, Norwegian School of Economics, Department of Business and Management Science.
    4. Ashenfelter, Orley & Bloom, David E. & Dahl, Gordon B., 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game: Evidence from Long Run Play," IZA Discussion Papers 7245, Institute for the Study of Labor (IZA).
    5. Conlin, Michael & Orsini, Joe & Tang, Meng-Chi, 2013. "The effect of an agent’s expertise on National Football League contract structure," Economics Letters, Elsevier, vol. 121(2), pages 275-281.
    6. Halla, Martin, 2007. "Divorce and the Excess Burden of Lawyers," IZA Discussion Papers 2962, Institute for the Study of Labor (IZA).
    7. Henri Fraisse, 2010. "Labour Disputes and the Game of Legal Representation," CESifo Working Paper Series 3084, CESifo Group Munich.

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