Final-offer arbitration with uncertainty averse parties

• 成果类型: Article
• 署名作者: Celen, Bogachan; Ozgur, Onur
• 刊物名称: GAMES AND ECONOMIC BEHAVIOR
• ISSN/ISSBN: 0899-8256
• DOI: 10.1016/j.geb.2018.01.007
• 发表日期: 2018
• 页码: 484-500
• 关键词: negotiation; Conflict resolution; ARBITRATION; Final-offer arbitration; Uncertainty aversion; multiple priors

摘要

Final-offer arbitration (FOA) is a widely used binding dispute resolution mechanism, where an impartial arbitrator is constrained to choose one of the two final offers proposed by two disputing parties. We build an equilibrium model of FOA with players averse to arbitral uncertainty to study three important issues: the role of FOA in incentivizing negotiated settlements, the convergence of final offers, and the normative effect of diversity of arbitrator opinion. We show that increase in arbitral uncertainty increases the likelihood of negotiated agreements, and make the final offers converge to each other. Risk aversion is not necessary for convergence of offers. Precision and mean of arbitral uncertainty matter differently and can be controlled separately. Moreover, as also argued by the industry practitioners, carefully selected level of diversity (of opinion) in the arbitrator roster increases the welfare of negotiating parties. (C) 2018 Elsevier Inc. All rights reserved.