Expectations and Comparative Arbitration Institutions
No 2003-02, Working Papers from Utah State University, Department of Economics
Arbitration is a growing method of resolving disputes in varied settings. While two specific arbitration rules dominate in practice, other procedures have been hypothesized to better promote voluntary settlement. Such hypotheses require theoretical assumptions of identical bargainer expectations even though divergent expectations or optimism is considered prevalent in naturally occurring negotiations. This article examines disputant behavior in a controlled laboratory setting where point-estimates of disputant expectations are captured, thus allowing one to test the “chilling effect” hypotheses of optimism on both dispute rates and final- offer divergence. The extent of the dual chilling effect is examined for both commonly used arbitration procedures as well as for an innovative procedure that, while not used in practice, is theoretically predicted to induce final-offer convergence when expectations are unbiased. The results show that optimism is prevalent in the data, extra information does not fully de-bias the disputants, and optimism increases both dispute rates and final- offer divergence. The degree to which a final offer plays a strategic role in the arbitration institution is an important determinant of this final chilling effect result. Lastly, once the effects of optimism are considered, the innovative arbitration procedure actually generates the highest dispute rates, contrary to its theoretical claim.
Pages: 29 pages
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
ftp://repec.bus.usu.edu/RePEc/usu/pdf/ERI2003-02.pdf First version, 2003 (application/pdf)
Working Paper: Expectations and Comparative Arbitration Institutions (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:usu:wpaper:2003-02
Access Statistics for this paper
More papers in Working Papers from Utah State University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by John Gilbert ().