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Bargaining in the Shadow of Arbitration

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  • R. Marselli
  • M. Vannini
  • B. Mccannon

Abstract

Arbitration, as an alternative to litigation for contract disputes, reduces costs and time. While it has frequently been thought of as a substitute to pretrial bargaining and litigation, in fact, parties may be able to reach a settlement privately while engaged in the arbitration process. Consequently, the institutional design of the arbitration may influence the bargaining. We develop a theoretical model of pre-arbitration bargaining that is able to identify the impact of the institutional features on its success. A detailed data set from arbitration proceedings in Italy is analyzed. The exogenous heterogeneity in the composition of the panel of arbitrators allows us to illustrate its effect on bargaining. We show that the number of arbitrators used interacts with their experience and independence to reduce uncertainty and facilitate settlement.

Suggested Citation

  • R. Marselli & M. Vannini & B. Mccannon, 2013. "Bargaining in the Shadow of Arbitration," Working Paper CRENoS 201309, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:201309
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    Cited by:

    1. Bryan C. McCannon, 2018. "Arbitration in classical Athens," Constitutional Political Economy, Springer, vol. 29(4), pages 413-423, December.
    2. Bryan C. McCannon & Paul Walker, 2016. "Endogenous competence and a limit to the Condorcet Jury Theorem," Public Choice, Springer, vol. 169(1), pages 1-18, October.
    3. Bryan C. McCannon, 2015. "Condorcet jury theorems," Chapters, in: Jac C. Heckelman & Nicholas R. Miller (ed.), Handbook of Social Choice and Voting, chapter 9, pages 140-160, Edward Elgar Publishing.
    4. Gershoni, Naomi, 2021. "Individual vs. group decision-making: Evidence from a natural experiment in arbitration proceedings," Journal of Public Economics, Elsevier, vol. 201(C).
    5. M. Vannini & B. Mccannon & R. Marselli & C. Detotto, 2022. "Experts and Arbitration Outcomes: Insights from Public Procurement Contract Disputes," Working Paper CRENoS 202204, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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    More about this item

    Keywords

    settlement; italy; contract dispute; bargaining; arbitration;
    All these keywords.

    JEL classification:

    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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