Affiliation Bias in Arbitration: An Experimental Approach

Abstract

A characteristic feature of arbitration, a growing form of dispute settlement, is that each disputing party appoints an arbitrator. Commentators, however, suggest that partyappointed arbitrators tend to be ‘biased’. Evaluating this claim from data on historical disputes is problematic due to non-random selection of arbitrators. Here, we use a novel experimental approach to estimate the causal effect of party-appointments. Using a new dataset of 266 participants around the world we confirm that professional arbitrators suffer from affiliation effects — a cognitive predisposition to favor the appointing party. At a methodological level, we offer a solution to the problem of measuring affiliation effects in a world confounded by selection effects.

Keywords: Arbitration, Dispute Settlement, Bias of Party-Appointed Arbitrators, Affiliation Effects