A Welfare Analysis of Arbitration

Wojciech Olszewski

American Economic Journal: Microeconomics, 2011, vol. 3, issue 1, 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)

JEL-codes: C78 D82 D86 J52 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mic.3.1.174
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Citations: View citations in EconPapers (3)

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