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Optimal Arbitration

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  • TYMOFIY MYLOVANOV
  • ANDRIY ZAPECHELNYUK

Abstract

We study common arbitration rules for disputes of two privately informed parties, final offer and conventional arbitration. Conventional arbitration is shown to be an optimal arbitration rule in environments with transferable utility, while final offer arbitration is optimal if utility is nontransferable and the parties’ interests are not too aligned. These results explain the prevalence of both arbitration rules in practice.

Suggested Citation

  • Tymofiy Mylovanov & Andriy Zapechelnyuk, 2013. "Optimal Arbitration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 769-785, August.
    • Handle: RePEc:wly:iecrev:v:54:y:2013:i:3:p:769-785
    DOI: 10.1111/iere.12016
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    References listed on IDEAS

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