Amended Final-Offer Arbitration is Improved Arbitration: Evidence from the Laboratory

21 Pages Posted: 20 May 2005

See all articles by Cary A. Deck

Cary A. Deck

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

Amy Farmer

University of Arkansas - Department of Economics

Dao-Zhi Zeng

Tohoku University - Graduate School of Information Sciences

Date Written: 2005

Abstract

Arbitration is frequently utilized to settle disputes. Much research has focused on the properties of final-offer arbitration (FOA) relative to conventional arbitration. Both mechanisms should encourage settlement in standard environments, but previous empirical work finds that impasses remain common. A modification of FOA, amended final-offer arbitration (AFOA), has been proposed as an alternative mechanism. This paper compares the theoretical and behavioral properties of AFOA and FOA. Controlled laboratory experiments indicate that AFOA significantly outperforms FOA, generating substantially greater pre-arbitration settlement. Consistent with the theoretical predictions, offers converge under AFOA; however, FOA offers neither converge nor are consistent with theoretical predictions.

Keywords: Arbitration, Bargaining, Experiments

Suggested Citation

Deck, Cary A. and Farmer, Amy and Zeng, Dao-Zhi, Amended Final-Offer Arbitration is Improved Arbitration: Evidence from the Laboratory (2005). IACM 18th Annual Conference, Available at SSRN: https://ssrn.com/abstract=726242 or http://dx.doi.org/10.2139/ssrn.726242

Cary A. Deck (Contact Author)

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

P.O. Box 870244
Tuscaloosa, AL 35487
United States

Amy Farmer

University of Arkansas - Department of Economics ( email )

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

Dao-Zhi Zeng

Tohoku University - Graduate School of Information Sciences ( email )

Aramaki aza Aoba 6-3-09, Aoba-ku
Sendai, Miyagi 980-8579
Japan
+81 22 795 4380 (Phone)
+81 22 795 4380 (Fax)

HOME PAGE: http://www.se.is.tohoku.ac.jp/~zeng/eng.html

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