Discovery in a Screening Model of Final Offer Arbitration

40 Pages Posted: 15 Jun 2020

See all articles by Amy Farmer

Amy Farmer

University of Arkansas - Department of Economics

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

Date Written: May 20, 2020

Abstract

We develop screening models of final offer arbitration (FOA) in which the uninformed party makes a demand to the informed party. We consider models in which settlement occurs before and after the submission of binding offers, and in each we analyze costly discovery. Our results are compared to conventional arbitration (CA) which may viewed as a litigation model. Overall, the incentive to invoke discovery is stronger in FOA than in CA, due in part, to informational rents often present in FOA, but not in CA. Moreover, submitted proposals under FOA contain information which raise the benefit of invoking discovery.

Keywords: Final Offer Arbitration, Asymmetric Information, Discovery

JEL Classification: K4, J52, D82

Suggested Citation

Farmer, Amy and Pecorino, Paul, Discovery in a Screening Model of Final Offer Arbitration (May 20, 2020). Available at SSRN: https://ssrn.com/abstract=3606498 or http://dx.doi.org/10.2139/ssrn.3606498

Amy Farmer

University of Arkansas - Department of Economics ( email )

Fayetteville, AR 72701
United States
501-575-6093 (Phone)
501-575-3241 (Fax)

Paul Pecorino (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

P.O. Box 870244
Tuscaloosa, AL 35487
United States
205-348-0379 (Phone)
205-348-0590 (Fax)

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