American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
A Welfare Analysis of Arbitration
American Economic Journal: Microeconomics
vol. 3,
no. 1, February 2011
(pp. 174–213)
Abstract
The paper compares conventional and final-offer arbitration. One party is supposed to make a payment to another party, whose amount depends on a state. Under one scenario, parties obtain signals about the state, which cannot be recognized by the opponents. If the arbitrator's ability of recognizing signals is high, the frequency of requesting arbitration is lower under conventional than under final-offer arbitration. If this ability is low, final-offer arbitration dominates conventional arbitration in quite a similar sense. Under the second scenario, parties believe that their opponents have wrong signals. Then, conventional arbitration approximates the original outcome better than final-offer arbitration. (JEL C78, D82, D86, J52)Citation
Olszewski, Wojciech. 2011. "A Welfare Analysis of Arbitration." American Economic Journal: Microeconomics, 3 (1): 174–213. DOI: 10.1257/mic.3.1.174JEL Classification
- C78 Bargaining Theory; Matching Theory
- D82 Asymmetric and Private Information
- D86 Economics of Contract: Theory
- J52 Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining
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