IDEAS home Printed from https://ideas.repec.org/p/cns/cnscwp/201309.html
   My bibliography  Save this paper

Bargaining in the Shadow of Arbitration

Author

Listed:
  • R. Marselli

    ()

  • M. Vannini

    ()

  • BC. 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 & BC. 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
    as

    Download full text from publisher

    File URL: http://crenos.unica.it/crenos/node/6358
    Download Restriction: no

    File URL: http://crenos.unica.it/crenos/sites/default/files/WP13-09.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Amy Farmer, 2007. "Bargaining over an Uncertain Value: Arbitration Mechanisms Compared," Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(3), pages 547-579, October.
    2. Speight, Alan & Thomas, Dennis, 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.
    3. Gibbons, Robert, 1988. "Learning in Equilibrium Models of Arbitration," American Economic Review, American Economic Association, pages 896-912.
    4. Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-159, February.
    5. Deck, Cary A. & Farmer, Amy, 2009. "Strategic bidding and investments in final offer arbitration: Theory and experimental evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 70(1-2), pages 361-373, May.
    6. 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.
    7. 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.
    8. Giuseppe Dari-Mattiacci, 2007. "Arbitration versus Settlement," Revue économique, Presses de Sciences-Po, vol. 58(6), pages 1291-1307.
    9. Ezra Friedman & Abraham L. Wickelgren, 2006. "Bayesian Juries and The Limits to Deterrence," Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(1), pages 70-86, April.
    10. Farmer, Amy & Tiefenthaler, Jill, 2001. "Conflict in divorce disputes: the determinants of pretrial settlement," International Review of Law and Economics, Elsevier, vol. 21(2), pages 157-180, June.
    11. Robert Gibbons, 1988. "Learning in Equilibrium Models of Arbitration," Working papers 485, Massachusetts Institute of Technology (MIT), Department of Economics.
    12. 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.
    13. Henry S. Farber, 1980. "An Analysis of Final-Offer Arbitration," Journal of Conflict Resolution, Peace Science Society (International), pages 683-705.
    14. Michael R. Baye & Joshua D. Wright, 2011. "Is Antitrust Too Complicated for Generalist Judges? The Impact of Economic Complexity and Judicial Training on Appeals," Journal of Law and Economics, University of Chicago Press, vol. 54(1), pages 1-24.
    15. 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.
    16. Farmer, Amy & Pecorino, Paul, 1998. "Bargaining with Informative Offers: An Analysis of Final-Offer Arbitration," The Journal of Legal Studies, University of Chicago Press, pages 415-432.
    17. Mueller,Dennis C., 2003. "Public Choice III," Cambridge Books, Cambridge University Press, number 9780521894753, December.
    18. Bryan C. McCannon, 2011. "Jury Size in Classical Athens: an Application of the Condorcet Jury Theorem," Kyklos, Wiley Blackwell, vol. 64(1), pages 106-121, February.
    19. 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 922-948, October.
    20. Spurr, Stephen J., 2000. "The role of nonbinding alternative dispute resolution in litigation," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 75-96, May.
    21. Vincent P. Crawford, 1982. "Compulsory Arbitration, Arbitral Risk and Negotiated Settlements: A Case Study in Bargaining under Imperfect Information," Review of Economic Studies, Oxford University Press, vol. 49(1), pages 69-82.
    22. Currie, Janet & McConnell, Sheena, 1994. "The Impact of Collective-Bargaining Legislation on Disputes in the U.S. Public Sector: No Legislation May Be the Worst Legislation," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 519-547, October.
    23. Amy Farmer Curry & Paul Pecorino, 1993. "The Use of Final Offer Arbitration as a Screening Device," Journal of Conflict Resolution, Peace Science Society (International), pages 655-669.
    24. 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.
    25. Gibbons, Robert, 1988. "Learning in Equilibrium Models of Arbitration," American Economic Review, American Economic Association, pages 896-912.
    26. Shavell, Steven, 1995. "Alternative Dispute Resolution: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, pages 1-28.
    27. 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, Oxford University Press, vol. 104(1), pages 99-120.
    28. Bernstein, Lisa, 1992. "Opting Out of the Legal System: Extralegal Contractual Relations in the Diamond Industry," The Journal of Legal Studies, University of Chicago Press, pages 115-157.
    29. McMillan, John & Woodruff, Christopher, 1999. "Dispute Prevention without Courts in Vietnam," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 637-658, October.
    30. Amy Farmer & Paul Pecorino, 2003. "Bargaining with Voluntary Transmission of Private Information: Does the Use of Final Offer Arbitration Impede Settlement?," Journal of Law, Economics, and Organization, Oxford University Press, vol. 19(1), pages 64-82, April.
    31. Farmer, Amy & Pecorino, Paul & Stango, Victor, 2004. "The Causes of Bargaining Failure: Evidence from Major League Baseball," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 543-568, October.
    32. McCannon, Bryan C., 2010. "The median juror and the trial of Socrates," European Journal of Political Economy, Elsevier, vol. 26(4), pages 533-540, December.
    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. Bryan McCannon & Paul Walker, 2016. "Endogenous Competence and a Limit to the Condorcet Jury Theorem," Working Papers 16-12, Department of Economics, West Virginia University.
    2. Bryan C. McCannon, 2015. "Condorcet jury theorems," Chapters,in: Handbook of Social Choice and Voting, chapter 9, pages 140-160 Edward Elgar Publishing.
    3. 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.

    More about this item

    Keywords

    settlement; italy; contract dispute; bargaining; arbitration;

    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

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:cns:cnscwp:201309. 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: (Antonello Pau). General contact details of provider: http://edirc.repec.org/data/crenoit.html .

    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 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.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.