Reputational Concerns in Arbitration: Decision Bias and Information Acquisition

27 Pages Posted: 15 Oct 2007

See all articles by Elisabetta Iossa

Elisabetta Iossa

University of Rome Tor Vergata; IEFE Bocconi University; Centre for Economic Policy Research (CEPR)

Date Written: June 2007

Abstract

We analyze how reputational concerns of arbitrators affect the quality of their decision process, in particular, information acquisition and bias. We assume that arbitrators differ in their ability to observe the state of the world and that information acquisition is costly and unobservable. We show that reputational concerns increase incentives for information acquisition but may induce arbitrators to bias their decisions towards one party in the dispute. This decision bias is greater when the dispute proceedings are confidential rather than public.

Building on these results, we study the circumstances under which the parties to a contract choose to employ arbitration rather than litigation in court to resolve their disputes.

Keywords: Arbitration, confidentiality, decision making, experts, information acquisition, reputational concerns

JEL Classification: D83, K41, J52

Suggested Citation

Iossa, Elisabetta, Reputational Concerns in Arbitration: Decision Bias and Information Acquisition (June 2007). Available at SSRN: https://ssrn.com/abstract=1018202 or http://dx.doi.org/10.2139/ssrn.1018202

Elisabetta Iossa (Contact Author)

University of Rome Tor Vergata ( email )

Via Columbia n.2
Rome, 00133
Italy

IEFE Bocconi University ( email )

Via Roentgen 1
Milan, Milan 20136
Italy

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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