Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes."

Henry S. Farber and Max H. Bazerman

No 2139, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: One prominent explanation for disagreement in bargaining is that the parties have divergent and relatively optimistic expectations regarding the ultimate outcome if they fail to agree. The fact that settlement rates are much higher where final-offer arbitration is the dispute settlement procedure than where conventional arbitration is the dispute settlement procedure is used as the basis of a test of the role of divergent expectations in causing disagreement in negotiations. Calculations of identical-expectations contract zones using existing estimates of models of arbitrator behavior yield larger identical-expectations contract zones in conventional arbitration than in final-offer arbitration. This evidence clearly suggests that divergent expectations alone are not an adequate explanation of disagreement in labor-management negotiations. A number of alternative explanations for disagreement are suggested and evaluated.

Date: 1987-01
Note: LS
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Citations: View citations in EconPapers (16)

Published as Quarterly Journal of Economics, Vol. CIV, No. 1, pp. 99-120, (February 1989).

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