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The Use of Final Offer Arbitration as a Screening Device

Author

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  • Amy Farmer Curry

    (University of Tennessee)

  • Paul Pecorino

    (University of Mississippi)

Abstract

Arbitration outcomes are uncertain. When risk preferences are unobservable, players may make offers that attempt to extract the willingness of risk-averse bargaining partners to pay to avoid the uncertainties of arbitration. When such a “hard†offer is made to a risk-neutral bargaining partner, it will be refused and arbitration will result. This is true even when the distribution of outcomes is common knowledge. Importantly, risk preferences may be difficult to communicate, even if it is in the interest of both parties to do so.

Suggested Citation

  • Amy Farmer Curry & Paul Pecorino, 1993. "The Use of Final Offer Arbitration as a Screening Device," Journal of Conflict Resolution, Peace Science Society (International), vol. 37(4), pages 655-669, December.
    • Handle: RePEc:sae:jocore:v:37:y:1993:i:4:p:655-669
    DOI: 10.1177/0022002793037004004
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    References listed on IDEAS

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    Cited by:

    1. Marselli, Riccardo & McCannon, Bryan C. & Vannini, Marco, 2015. "Bargaining in the shadow of arbitration," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 356-368.
    2. Phillip A. Miller, 2000. "An Analysis of Final Offers Chosen in Baseball's Arbitration System," Journal of Sports Economics, , vol. 1(1), pages 39-55, February.
    3. Farmer, Amy & Pecorino, Paul, 2022. "Discovery in a screening model of final offer arbitration," International Review of Law and Economics, Elsevier, vol. 69(C).
    4. Pecorino, Paul & Van Boening, Mark, 2001. "Bargaining and Information: An Empirical Analysis of A Multistage Arbitration Game," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 922-948, October.
    5. Daniel R. Marburger & Paul L. Burgess, 2004. "Can Prior Offers and Arbitration Outcomes Be Used to Predict the Winners of Subsequent Final‐Offer Arbitration Cases?," Southern Economic Journal, John Wiley & Sons, vol. 71(1), pages 93-102, July.
    6. Zeng, Dao-Zhi, 2006. "How powerful is arbitration procedure AFOA?," International Review of Law and Economics, Elsevier, vol. 26(2), pages 227-240, June.
    7. Farmer, Amy & Pecorino, Paul & Stango, Victor, 2004. "The Causes of Bargaining Failure: Evidence from Major League Baseball," Journal of Law and Economics, University of Chicago Press, vol. 47(2), pages 543-568, October.
    8. David J. Faurot, 2001. "Equilibrium Explanation of Bargaining and Arbitration in Major League Baseball," Journal of Sports Economics, , vol. 2(1), pages 22-34, February.

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