Bargaining Outcomes with Double-Offer Arbitration
- ASU Author/Contributor (non-ASU co-authors, if there are any, appear on document)
- David L. Dickinson Ph.D., Professor (Creator)
- Institution
- Appalachian State University (ASU )
- Web Site: https://library.appstate.edu/
Abstract: Increasingly, arbitration is becoming used to resolve bargaining disputes in a variety of
settings. Reducing dispute rates is often listed as a main goal in designing arbitration
mechanisms. Conventional arbitration and final-offer arbitration are two commonly used
procedures, but theoretical examinations of these arbitration procedures show that disputants’
final bargaining positions do not converge and disagreement is likely. This article contains
results from a set of experiments designed to compare bargaining outcomes under the two
commonly used arbitration procedures with outcomes under an innovative procedure called
“double-offer” arbitration (Zeng et al. 1996). This procedure requires that disputants make two
final offers at impasse: a primary and a secondary offer. The arbitrator evaluates the pairs of
offers using a linear criterion function, and theory suggests the secondary offers converge to the
median of the arbitrator’s preferred settlement distribution. Because the procedure’s rules are
that convergence of offers generates a settlement at those offers, this theoretical convergence
result implies that arbitration is not needed in the end. Experimental results indicate that dispute
rates in double-offer arbitration are, on average, about the same as dispute rates in conventional
arbitration. However, other results show reason to favor double-offer arbitration. Specifically,
in repeated bargaining, there is concern over whether use of an arbitration procedure becomes
addictive and makes bargainers more likely to use the procedure in the future—a “narcotic
effect.” The data show that double-offer arbitration is non-addictive, whereas both conventional and final-offer arbitration are.
Bargaining Outcomes with Double-Offer Arbitration
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Additional Information
- Publication
- Dickinson, David L. (2005). Bargaining Outcomes with Double-Offer Arbitration. Experimental Economics, 8(2): 145-66. (June 2005) Published by Springer Verlag. (ISSN: 1573-6938) The original publication is available at www.springerlink.com.
- Language: English
- Date: 2005