Bargaining and Hold-up: The Role of Arbitration

Yannick Gabuthy and Abhinay Muthoo

Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg

Abstract: This paper presents an “incomplete contracting” model of arbitration. A fundamental notion that underlies our analysis is that it is optimal (in terms of promoting productivity-enhancing, relationship-specific investments) to determine ex-ante – well before arbitration would actually be required (if at all) – whether or not parties would engage the services of an arbitrator in the eventuality that they fail to resolve any disputes by themselves. We embed this idea in a simple model of a long-term relationship between a firm and its workforce, in which they can make (non-contractible) investments, and then negotiate over the division of the resultant surplus, which, if previously agreed, occurs in the shadow of arbitration. We derive several results and insights concerning whether or not it is optimal for the parties to commit to call an arbitrator, in terms of arbitrator-preference and technological parameters.

Keywords: Arbitration; Non-Contractible Investments; Hold-up; Bargaining. (search for similar items in EconPapers)
JEL-codes: D74 J52 K41 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cta and nep-mic
References: Add references at CitEc
Citations:

Downloads: (external link)
http://beta.u-strasbg.fr/WP/2018/2018-04.pdf (application/pdf)

Related works:
Journal Article: Bargaining and hold-up: the role of arbitration (2019)
Working Paper: Bargaining and hold-up: the role of arbitration (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ulp:sbbeta:2018-04

Access Statistics for this paper

More papers in Working Papers of BETA from Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg Contact information at EDIRC.
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).