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Bargaining and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration

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  • Orley Ashenfelter

    (Princeton University)

  • Gordon B. Dahl

    (University of California, San Diego)

Abstract

Expert agents, such as lawyers, play a prominent role in conflict resolution, yet little is known about how they affect outcomes. We construct a model that permits us to estimate the influence of agents and test whether the parties in a dispute face prisoner's dilemma incentives. Using eighteen years of final-offer arbitration data from New Jersey, we find the parties do significantly better when they retain agents and that the parties learn about this benefit over time. However, we also find that the gain to using an agent is fully offset when the opposing party also hires an agent. Since agents are costly, this noncooperative equilibrium is Pareto inferior. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Suggested Citation

  • Orley Ashenfelter & Gordon B. Dahl, 2012. "Bargaining and the Role of Expert Agents: An Empirical Study of Final-Offer Arbitration," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 116-132, February.
    • Handle: RePEc:tpr:restat:v:94:y:2012:i:1:p:116-132
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    Cited by:

    1. Farmer, Amy & Pecorino, Paul, 2022. "Discovery in a screening model of final offer arbitration," International Review of Law and Economics, Elsevier, vol. 69(C).
    2. Rosa Ferrer, 2015. "The Effect of Lawyers' Career Concerns on Litigation," Working Papers 844, Barcelona School of Economics.
    3. Alon Klement & Zvika Neeman, 2013. "Does Information about Arbitrators' Win/Loss Ratios Improve Their Accuracy?," The Journal of Legal Studies, University of Chicago Press, vol. 42(2), pages 369-397.
    4. 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.
    5. Juranek, Steffen, 2015. "Investing in legal advice - What determines the costs of enforcing intellectual property rights?," Discussion Papers 2015/20, Norwegian School of Economics, Department of Business and Management Science.
    6. Ashenfelter, Orley & Bloom, David E. & Dahl, Gordon B., 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game: Evidence from Long Run Play," IZA Discussion Papers 7245, Institute of Labor Economics (IZA).
    7. Claudio Detotto & Riccardo Marselli & Bryan C. McCannon & Marco Vannini, 2024. "Experts and arbitration outcomes: Insights from public procurement contract disputes," Kyklos, Wiley Blackwell, vol. 77(4), pages 922-943, November.
    8. Orley Ashenfelter & David E. Bloom & Gordon B. Dahl, 2013. "Lawyers as Agents of the Devil in a Prisoner's Dilemma Game," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 10(3), pages 399-423, September.
    9. Conlin, Michael & Orsini, Joe & Tang, Meng-Chi, 2013. "The effect of an agent’s expertise on National Football League contract structure," Economics Letters, Elsevier, vol. 121(2), pages 275-281.
    10. J. Ryan Lamare, 2020. "The Devil Is in the Details: Attorney Effects on Employment Arbitration Outcomes," ILR Review, Cornell University, ILR School, vol. 73(2), pages 456-478, March.
    11. Juranek, Steffen, 2018. "Investing in legal advice," Information Economics and Policy, Elsevier, vol. 44(C), pages 28-46.
    12. Halla, Martin, 2007. "Divorce and the Excess Burden of Lawyers," IZA Discussion Papers 2962, Institute of Labor Economics (IZA).
    13. Ernan Haruvy & Yefim Roth, 2022. "On the Impact of an Intermediary Agent in the Ultimatum Game," Games, MDPI, vol. 13(3), pages 1-16, May.
    14. Farmer, Amy & Pecorino, Paul, 2024. "Proposal convergence and settlement under final offer arbitration," International Review of Law and Economics, Elsevier, vol. 77(C).
    15. Henri Fraisse, 2010. "Labour Disputes and the Game of Legal Representation," CESifo Working Paper Series 3084, CESifo.

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