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Negotiation under possible third party settlement

Author

Listed:
  • Birkeland d.y., Sigbjørn

    () (Dept. of Economics, Norwegian School of Economics and Business Administration)

Abstract

The effect of possible third party settlement on negotiation behaviour 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 settlement 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 rounds of bargaining. The production phase has an effect on the distributional property of the settlements. In negotiations where third party settlement is an option, the negotiation outcome shifts towards a more unequal outcome, more in line with each person's contribution.

Suggested Citation

  • Birkeland d.y., Sigbjørn, 2010. "Negotiation under possible third party settlement," Discussion Paper Series in Economics 6/2011, Norwegian School of Economics, Department of Economics.
  • Handle: RePEc:hhs:nhheco:2011_006
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    References listed on IDEAS

    as
    1. Alexander W. Cappelen & Astri Drange Hole & Erik Ø Sørensen & Bertil Tungodden, 2007. "The Pluralism of Fairness Ideals: An Experimental Approach," American Economic Review, American Economic Association, vol. 97(3), pages 818-827, June.
    2. Simon Gächter & Arno Riedl, 2005. "Moral Property Rights in Bargaining with Infeasible Claims," Management Science, INFORMS, vol. 51(2), pages 249-263, February.
    3. Bolton, Gary E. & Katok, Elena, 1998. "Reinterpreting Arbitration's Narcotic Effect: An Experimental Study of Learning in Repeated Bargaining," Games and Economic Behavior, Elsevier, vol. 25(1), pages 1-33, October.
    4. Simon Gächter & Arno Riedl, 2006. "Dividing Justly in Bargaining Problems with Claims," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 27(3), pages 571-594, December.
    5. James Konow, 2000. "Fair Shares: Accountability and Cognitive Dissonance in Allocation Decisions," American Economic Review, American Economic Association, vol. 90(4), pages 1072-1091, September.
    6. Charness, Gary, 2000. "Bargaining efficiency and screening: an experimental investigation," Journal of Economic Behavior & Organization, Elsevier, vol. 42(3), pages 285-304, July.
    7. Konow, James, 1996. "A positive theory of economic fairness," Journal of Economic Behavior & Organization, Elsevier, vol. 31(1), pages 13-35, October.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Arbitration; Bargaining effciency; Experiment.;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

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