Amended final-offer arbitration over an uncertain value: A comparison with CA and FOA

Cary Deck, Amy Farmer, Dao Zhi Zeng

Research output: Contribution to journalArticlepeer-review

7 Citations (Scopus)

Abstract

Arbitration is increasingly employed to resolve disputes. Two arbitration mechanisms, conventional arbitration (CA) and final-offer arbitration (FOA) are commonly utilized, but previous theoretical and empirical research has found that they are unsatisfactory. Several alternative mechanisms have been proposed, but ultimately laboratory research has found that they do not offer an improvement. An exception is amended final-offer arbitration (AFOA), which not only has desirable theoretical properties but also has been demonstrated to outperform FOA in the laboratory. This study provides a direct laboratory comparison of AFOA with CA. Also, by utilizing an environment with an uncertain payoff to one of the parties, this study tests the robustness of AFOA's performance relative to FOA. The results indicate that AFOA does outperform FOA, but that AFOA is only weakly better than CA.

Original languageEnglish
Pages (from-to)439-454
Number of pages16
JournalExperimental Economics
Volume10
Issue number4
DOIs
Publication statusPublished - 2007 Dec
Externally publishedYes

Keywords

  • Arbitration
  • Bargaining
  • Dispute resolution
  • Experiments

ASJC Scopus subject areas

  • Economics, Econometrics and Finance (miscellaneous)

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