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An Experimental Comparison Of Dispute Rates In Alternative Arbitration Systems

Author

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  • ASHENFELTER, O.
  • CURRIE, J.
  • FARBER, H.S.
  • SPIEGEL, M.

Abstract

This paper reports the results of a systematic experimental comparison of the effect of alternative arbitration systems on dispute rates. The key to our experimental design is the use of a common underlying distribution of arbitrator "fair" awards in the different arbitration systems. This allows us to compare dispute rates across different arbitration procedures where we hold fixed the amount of objective underlying uncertainty about the arbitration awards. There are three main findings. First, dispute rates are inversely related to the monetary costs of disputes. Dispute rates were much lower in cases where arbitration was not available so that the entire pie was lost in the event of dispute. Second, contrary to conventional wisdom, the dispute rate in a final-offer arbitration system is at least as high as the dispute rate in comparable conventional arbitration system. Third, dispute rates are inversely related to the uncertainty costs of disputes. Dispute rates were lower in conventional arbitration treatments where the variance of the arbitration award was higher and imposed greater costs on risk-averse negotiators. Our results can also be interpreted as providing tentative evidence that the negotiators were risk-averse on average.
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Suggested Citation

  • Ashenfelter, O. & Currie, J. & Farber, H.S. & Spiegel, M., 1990. "An Experimental Comparison Of Dispute Rates In Alternative Arbitration Systems," Papers 55, Princeton, Woodrow Wilson School - Discussion Paper.
  • Handle: RePEc:fth:priwdp:55
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    References listed on IDEAS

    as
    1. Currie, J. & Mcconnell, S., 1989. "Strikes And Arbitration In The Public Sector: Can Legislation Reduce Dispute Costs?," Papers 360, London School of Economics - Centre for Labour Economics.
    2. Max H. Bazerman & Henry S. Farber, 1985. "Arbitrator Decision Making: When are Final Offers Important?," ILR Review, Cornell University, ILR School, vol. 39(1), pages 76-89, October.
    3. Harrison, Glenn W, 1989. "Theory and Misbehavior of First-Price Auctions," American Economic Review, American Economic Association, vol. 79(4), pages 749-762, September.
    4. Bloom, David E & Cavanagh, Christopher L, 1986. "An Analysis of the Selection of Arbitrators," American Economic Review, American Economic Association, vol. 76(3), pages 408-422, June.
    5. Henry S. Farber & Harry C. Katz, 1979. "Interest Arbitration, Outcomes, and the Incentive to Bargain," ILR Review, Cornell University, ILR School, vol. 33(1), pages 55-63, October.
    6. 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.
    7. Tracy, Joseph S, 1986. "An Investigation into the Determinants of U.S. Strike Activity," American Economic Review, American Economic Association, vol. 76(3), pages 423-436, June.
    8. Orley Ashenfelter & David Bloom, 1981. "Models of Arbitrator Behavior: Theory and Evidence," Working Papers 526, Princeton University, Department of Economics, Industrial Relations Section..
    9. 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.
    10. Kalyan Chatterjee & William Samuelson, 1983. "Bargaining under Incomplete Information," Operations Research, INFORMS, vol. 31(5), pages 835-851, October.
    11. McConnell, Sheena, 1989. "Strikes, Wages, and Private Information," American Economic Review, American Economic Association, vol. 79(4), pages 801-815, September.
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    More about this item

    Keywords

    bargaining ; arbitration;

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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