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Bargaining in the Shadow of Arbitration

Author

Listed:
  • Ricardo Marselli

    (Parthenope University, Department of Economics)

  • Bryan C. McCannon

    (West Virginia University, Department of Economics)

  • Marco Vannini

    (University of Sassari)

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 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

  • Ricardo Marselli & Bryan C. McCannon & Marco Vannini, 2015. "Bargaining in the Shadow of Arbitration," Working Papers 15-19, Department of Economics, West Virginia University.
    • Handle: RePEc:wvu:wpaper:15-19
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    File URL: https://researchrepository.wvu.edu/cgi/viewcontent.cgi?article=1149&context=econ_working-papers
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    Cited by:

    1. 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.
    2. Claudio Detotto & Riccardo Marselli & Bryan C. McCannon & Marco Vannini, 2024. "Experts and arbitration outcomes: Insights from public procurement contract disputes," Kyklos, Wiley Blackwell, vol. 77(4), pages 922-943, November.
    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.
    4. Bryan C. McCannon, 2018. "Arbitration in classical Athens," Constitutional Political Economy, Springer, vol. 29(4), pages 413-423, December.
    5. Gershoni, Naomi, 2021. "Individual vs. group decision-making: Evidence from a natural experiment in arbitration proceedings," Journal of Public Economics, Elsevier, vol. 201(C).
    6. Farmer, Amy & Pecorino, Paul, 2024. "Proposal convergence and settlement under final offer arbitration," International Review of Law and Economics, Elsevier, vol. 77(C).

    More about this item

    Keywords

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    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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