Final Offer Arbitration with Asymmetric Evidence

Yongjoon Kim (), Afia Promi (), Jiatong Xue () and Cary Deck ()
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Yongjoon Kim: University of Alabama
Afia Promi: University of Alabama
Jiatong Xue: University of Alabama
Cary Deck: University of Alabama and Economic Science Institute, Chapman University

Working Papers from Chapman University, Economic Science Institute

Abstract: As disputants increasingly rely upon arbitration it is critical to understand outcomes that are likely to arise from mechanisms like final offer arbitration. While a sizable experimental literature investigating strategic behavior in final offer arbitration exists, that work has overwhelmingly focused on situations where the arbitrator’s beliefs about the appropriate resolution are symmetric and uninfluenced by the disputants’ cases. This paper considers a setting where the arbitrator’s beliefs depend on the strength of each disputant’s case. We find disputant responses to changes in the relative strength of their case generally follow comparative statics predictions. Further, we find that final offers are closer to theoretical predictions when the mean of the arbitrator’s preferences favors the disputant and the variance of those preferences is lower. However, we also observe that disputants become more aggressive the more the arbitrator’s preferences are skewed in the disputant’s favor.

Keywords: Final Offer Arbitration; Laboratory Experiments (search for similar items in EconPapers)
JEL-codes: C7 C9 J5 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:25-15

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