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Negotiation under Possible Third-Party Resolution

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  • Sigbjørn Birkeland

Abstract

The effect of a possible third-party resolution on negotiation behavior is studied in an economic bargaining experiment. The bargaining phase is preceded by a production phase that allows for different fairness principles to guide the division of the total production value. The experimental results show that a possible third-party resolution lowers the dispute costs by reducing the number of rounds of alternating offers. In the presence of a third party, negotiators make first offers that are more strongly related to their production, which reduces the number of bargaining rounds. The production phase has an effect on the distributional property of the agreements. In negotiations in which third-party resolution is an option, the negotiation outcome shifts toward a more unequal outcome, more in line with each person's contribution.

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  • Sigbjørn Birkeland, 2013. "Negotiation under Possible Third-Party Resolution," Journal of Law and Economics, University of Chicago Press, vol. 56(2), pages 281-299.
    • Handle: RePEc:ucp:jlawec:doi:10.1086/669962
    DOI: 10.1086/669962
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    Cited by:

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    3. Gantner, Anita & Horn, Kristian & Kerschbamer, Rudolf, 2016. "Fair and efficient division through unanimity bargaining when claims are subjective," Journal of Economic Psychology, Elsevier, vol. 57(C), pages 56-73.
    4. Bochet, Olivier & Laurent-Lucchetti, Jeremy & Leroux, Justin & Sinclair-Desgagné, Bernard, 2019. "Collective risk-taking in the commons," Journal of Economic Behavior & Organization, Elsevier, vol. 163(C), pages 277-296.
    5. Sigbjørn Birkeland & Bertil Tungodden, 2014. "Fairness motivation in bargaining: a matter of principle," Theory and Decision, Springer, vol. 77(1), pages 125-151, June.
    6. Bolton, Gary E. & Karagözoğlu, Emin, 2016. "On the influence of hard leverage in a soft leverage bargaining game: The importance of credible claims," Games and Economic Behavior, Elsevier, vol. 99(C), pages 164-179.
    7. Dezső, Linda & Loewenstein, George & Steinhart, Jonathan & Neszveda, Gábor & Szászi, Barnabás, 2015. "The pernicious role of asymmetric history in negotiations," Journal of Economic Behavior & Organization, Elsevier, vol. 116(C), pages 430-438.
    8. Konow, James & Saijo, Tatsuyoshi & Akai, Kenju, 2020. "Equity versus equality: Spectators, stakeholders and groups," Journal of Economic Psychology, Elsevier, vol. 77(C).

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