IDEAS home Printed from https://ideas.repec.org/p/pri/econom/1987-1.html
   My bibliography  Save this paper

Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes

Author

Listed:
  • Max H. Bazerman

    (Kellogg Graduate School of Management)

  • Henry S. Farber

    (MIT)

Abstract

One prominent explanation for disagreement in bargaining is that the parties have divergent and relatively optimistic expectations regarding the ultimate outcome if they fail to agree. The fact that settlement rates are much higher where final-offer arbitration is the dispute settlement procedure than where conventional arbitration is the dispute settlement procedure is used as the basis of a test of the role of divergent expectations in causing disagreement in negotiations. Calculations of identical-expectations contract zones using existing estimates of models of arbitrator behavior yield larger identical-expectations contract zones in conventional arbitration than in final-offer arbitration. This evidence clearly suggests that divergent expectations alone are not an adequate explanation of disagreement in labor-management negotiations. A number of alternative explanations for disagreement are suggested and evaluated.

Suggested Citation

  • Max H. Bazerman & Henry S. Farber, 1987. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes," Working Papers 1987-1, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:1987-1
    as

    Download full text from publisher

    File URL: https://www.nber.org/system/files/working_papers/w2139/w2139.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James N. Dertouzos & John H. Pencavel, 1980. "Wage and Employment Determinants under Trade Unionism: The InternationalTypographical Union," NBER Working Papers 0570, National Bureau of Economic Research, Inc.
    2. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 40-87, June.
    3. Bloom, David E, 1986. "Empirical Models of Arbitrator Behavior under Conventional Arbitration," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 578-585, November.
    4. Bloom, David E & Cavanagh, Christopher L, 1986. "An Analysis of the Selection of Arbitrators," American Economic Review, American Economic Association, vol. 76(3), pages 408-422, June.
    5. Joel Sobel & Takahashi, 1983. "A Multi-stage Model of Bargaining," Levine's Working Paper Archive 255, David K. Levine.
    6. Freeman, Richard B, 1986. "Unionism Comes to the Public Sector," Journal of Economic Literature, American Economic Association, vol. 24(1), pages 41-86, March.
    7. Crawford, Vincent P, 1982. "A Theory of Disagreement in Bargaining," Econometrica, Econometric Society, vol. 50(3), pages 607-637, May.
    8. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-942, October.
    9. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 3-39, June.
    10. Joel Sobel & Ichiro Takahashi, 1983. "A Multistage Model of Bargaining," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 50(3), pages 411-426.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Henry S. Farber & Max H. Bazerman, 1987. "Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence from a Comparison of Arbitration Schemes."," NBER Working Papers 2139, National Bureau of Economic Research, Inc.
    2. repec:eee:labchp:v:2:y:1986:i:c:p:1039-1089 is not listed on IDEAS
    3. Henry S. Farber, 2001. "Notes on the Economics of Labor Unions," Working Papers 2001-5, Princeton University. Economics Department..
    4. Ester Faia & Lorenza Rossi, 2013. "Union Power, Collective Bargaining, And Optimal Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 408-427, January.
    5. Drydakis Nick, 2011. "Greek unions' preferences: measuring trends in the field. An exploratory note on the period 2008–2009," Transfer: European Review of Labour and Research, , vol. 17(4), pages 563-576, November.
    6. repec:pri:indrel:dsp01cc08hf62w is not listed on IDEAS
    7. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
    8. Card, David, 1986. "An Empirical Model of Wage Indexation Provisions in Union Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 144-175, June.
    9. Farber, H.S. & Abowd, J.M., 1990. "Product Market Competition, Union Organizing Activity, And The Employer Resistance," Working papers 551, Massachusetts Institute of Technology (MIT), Department of Economics.
    10. Swati Basu & Saul Estrin & Jan Svejnar, 2005. "Employment Determination in Enterprises under Communism and in Transition: Evidence from Central Europe," ILR Review, Cornell University, ILR School, vol. 58(3), pages 353-369, April.
    11. Andrews, Martyn & Harrison, Alan, 1998. "Testing for Efficient Contracts in Unionized Labour Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 50(3), pages 171-200, July.
    12. Peter J. Luke & Mark E. Schaffer, 1999. "Wage Determination in Russia: An Econometric Investigation," CERT Discussion Papers 9908, Centre for Economic Reform and Transformation, Heriot Watt University.
    13. Francesc Dilmé, 2023. "The Role of Discounting in Bargaining with Private Information," ECONtribute Discussion Papers Series 267, University of Bonn and University of Cologne, Germany.
    14. Tito Boeri, 2015. "Perverse effects of two-tier wage bargaining structures," IZA World of Labor, Institute of Labor Economics (IZA), pages 101-101, January.
    15. Jeffrey S. Zax, 1985. "Municipal Employment, Municipal Unions, and Demand for Municipal Services," NBER Working Papers 1728, National Bureau of Economic Research, Inc.
    16. Rumen Kostadinov, 2024. "Regret in Durable-Good Monopoly," Department of Economics Working Papers 2024-02, McMaster University.
    17. Sambuddha Ghosh & Gabriele Gratton & Caixia Shen, 2019. "Intimidation: Linking Negotiation And Conflict," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1589-1618, November.
    18. Marie-Claire Villeval & Manfred Konigstein, 2005. "The Choice of the Agenda in Labor Negotiations: efficiency and behavioral considerations," Working Papers 0508, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    19. Paul Beaudry & David A. Green & Ben M. Sand, 2018. "In Search of Labor Demand," American Economic Review, American Economic Association, vol. 108(9), pages 2714-2757, September.
    20. John M. Abowd & Francis Kramarz & David N. Margolis, 1999. "High Wage Workers and High Wage Firms," Econometrica, Econometric Society, vol. 67(2), pages 251-334, March.
    21. de la Croix, David & Palm, Franz C. & Pfann, Gerard A., 1996. "A dynamic contracting model for wages and employment in three European economies," European Economic Review, Elsevier, vol. 40(2), pages 429-448, February.
    22. Lubotsky, Darren & Olson, Craig A., 2015. "Premium copayments and the trade-off between wages and employer-provided health insurance," Journal of Health Economics, Elsevier, vol. 44(C), pages 63-79.

    More about this item

    Keywords

    Game Theory; Bargaining Theory; Collective Bargaining;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:econom:1987-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/deprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.