Bargaining in the shadow of arbitration

Riccardo Marselli, Bryan McCannon and Marco Vannini

Journal of Economic Behavior & Organization, 2015, vol. 117, issue C, 356-368

Abstract: Arbitration, as an alternative to litigation for contract disputes, reduces costs and time. While it has frequently been thought of as a substitute to pretrial bargaining and litigation, in fact, parties may be able to reach a settlement privately while engaged in the arbitration process. Consequently, the institutional design may influence the bargaining. We develop a theoretical model of pre-arbitration bargaining that is able to identify the impact of the institutional features on its success. A detailed data set from arbitration proceedings in Italy is analyzed. The exogenous heterogeneity in the composition of the panel of arbitrators allows us to illustrate its effect on bargaining. We show that the number of arbitrators used interacts with their experience and independence to reduce uncertainty and facilitate settlement.

Keywords: Arbitration; Bargaining; Contract dispute; Conventional arbitration; Italy; Settlement (search for similar items in EconPapers)
JEL-codes: C78 K41 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Working Paper: Bargaining in the Shadow of Arbitration (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:117:y:2015:i:c:p:356-368

DOI: 10.1016/j.jebo.2015.06.016

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