OPTIMAL ARBITRATION

Tymofiy Mylovanov and Andriy Zapechelnyuk

International Economic Review, 2013, vol. 54, issue 3, 769-785

Abstract: We study common arbitration rules for disputes of two privately informed parties, final offer and conventional arbitration. Conventional arbitration is shown to be an optimal arbitration rule in environments with transferable utility, while final offer arbitration is optimal if utility is nontransferable and the parties’ interests are not too aligned. These results explain the prevalence of both arbitration rules in practice.

Date: 2013
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