Arbitration and Bargaining Across the Pacific

Abstract

This paper reports laboratory experiments comparing arbitration behavior between and across two developed countries with extensive trade relations, the United States and Japan. Besides comparing domestic disputes in both locations, we evaluate disputes between them. While we find nominal differences between the US and Japan, we observe significant changes in both groups' behavior when facing someone from the other country. Specifically, Americans become more aggressive when facing a Japanese counterpart and Japanese subjects settle more frequently with an American counterpart. Our results suggest that previous research designed to document differences in bargaining behavior across cultures paints an incomplete picture of international comparisons by failing to consider bargaining interactions.

Keywords: Arbitration, Culture, Experiments, International Interactions