Economics at your fingertips  

An Analysis of Final-Offer Arbitration

Henry S. Farber
Additional contact information
Henry S. Farber: Department of Economics Massachusetts Institute of Technology

Journal of Conflict Resolution, 1980, vol. 24, issue 4, 683-705

Abstract: A model of the final-offer arbitration (FOA) process is developed, and the Nash equilibrium pair of final offers is derived. It is shown that the more risk-averse party submits a more reasonable offer so that it has a higher probability of being chosen by the arbitrator. The contract zone of potential negotiated settlements is derived, and its size is shown to be directly related to the uncertainty of the parties concerning the arbitrators' preferences. However, the final offers of the parties diverge where there is increased uncertainty, so that there is a trade-off between the size of the contract zone and the extremity of arbitrated awards when negotiations do fail. Finally, it is shown that negotiated settlements under FOA are skewed against the more risk-averse party.

Date: 1980
References: Add references at CitEc
Citations: View citations in EconPapers (37) Track citations by RSS feed

Downloads: (external link) (text/html)

Related works:
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:

Access Statistics for this article

More articles in Journal of Conflict Resolution from Peace Science Society (International)
Bibliographic data for series maintained by SAGE Publications ().

Page updated 2019-10-20
Handle: RePEc:sae:jocore:v:24:y:1980:i:4:p:683-705