The contractual dispute resolution game: Real-effort experiments on contract negotiation and arbitration

Brice Corgnet, Simon Gächter and Roberto Hernán-González

Journal of Economic Behavior & Organization, 2025, vol. 231, issue C

Abstract: In many contractual arrangements where product or service delivery occurs sometime after contracts have been concluded, conditions may change, leading to disputes that need to be resolved often by a third party (arbitrator/mediator). In this paper we introduce the Contractual Dispute Resolution Game (CDRG), which allows us to study dispute resolution through arbitration. Unlike prior research studying arbitration at impasse using zero-sum bargaining games, we analyze a situation where parties can create additional value. We introduce a novel real-effort task, the Car Assembly Real-effort Task (CART), and show in two studies how automated arbitration rules (Study 1) and human arbitrators (Study 2) affect dispute resolution and surplus creation. In Study 1, we find that high-accuracy arbitration enhances efficiency. In Study 2, we find that arbitrators who are incentivized based on the total surplus of the negotiation do also promote greater efficiency. The CDRG provides a valuable tool for examining the effects of arbitration and mediation in settings where contracts are incomplete and can be impacted by shocks.

Keywords: Contractual disputes; Cooperation; Arbitration; Fairness; Risk-sharing; Laboratory experiments; Real-effort experiments; Car Assembly Real-effort Task (CART); Contractual Dispute Resolution Game (CDRG) (search for similar items in EconPapers)
JEL-codes: C92 D23 D74 D90 J52 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:231:y:2025:i:c:s0167268125000228

DOI: 10.1016/j.jebo.2025.106902

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