Abstract
A series of experiments compares bargaining behavior under three different settings: no arbitration, conventional and final-offer arbitration. Under no arbitration, disputes with zero payoffs were around 10%, while the pie was equally split in less than half of the cases. Under conventional arbitration – where the arbitrator is free to choose his award – every third negotiation ended in dispute, evidencing a modified chilling effect. Under final-offer arbitration – where the arbitrator must award the bargainers either one of their final offers – there was only a small increase in disputes, while equal splits doubled to 80%. The experiment shows that final-offer arbitration, despite having lower dispute rates, interferes more with bargaining behavior than conventional arbitration, where bargaining behavior is similar to that seen in the no-arbitration treatment. Under final-offer arbitration, negotiators adjust their bargaining strategy on the arbitrator’s expected award.
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Kritikos, A.S. The Impact of Compulsory Arbitration on Bargaining Behavior: An Experimental Study. Economics of Governance 7, 293–315 (2006). https://doi.org/10.1007/s10101-006-0011-2
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DOI: https://doi.org/10.1007/s10101-006-0011-2