 Proposal convergence and settlement under final offer arbitrationAmy Farmer and Paul Pecorino () International Review of Law and Economics, 2024, vol. 77, issue C Abstract: Under final offer arbitration (FOA), each party to the dispute submits a proposal to the arbitrator who must choose one of the two submitted proposals in the event an agreement is not reached. A long line of research on FOA has assumed that the submitted proposals to the arbitrator are the final bargaining positions of the parties to the dispute. One consequence of this assumption has been a focus on whether proposals submitted to the arbitrator converge towards one another. However, current practice implies a separation between settlement negotiations and proposals submitted to the arbitrator. We use a simple setting to show that proposal convergence can be consistent with an increase in disputes, a decrease in disputes or no effect on the dispute rate. In order to be fully evaluated, mechanisms which lead to proposal convergence must be embedded in a model in which disputes arise endogenously. Understanding FOA is important because it is a widely used procedure. These uses include labor disputes as well as pricing disputes in the telecommunications industries of the United States and Canada. Keywords: Final offer arbitration; Proposal convergence; Settlement (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:77:y:2024:i:c:s0144818823000571 DOI: 10.1016/j.irle.2023.106179 Access Statistics for this article International Review of Law and Economics is currently edited by C. Ott, A. W. Katz and H-B. Schäfer More articles in International Review of Law and Economics from Elsevier |
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