Working Paper: NBER ID: w1841
Authors: David E. Bloom
Abstract: This study analyzes a new set of data on the decisions of conventional arbitrators. The main goal is to draw inferences about the extent to which conventional arbitration decisions are fashioned as mechanical compromises of the parties' final offers, without reference to the exogenous facts involved, in different disputes. The results of the analysis are remarkably clear : conventional arbitrators tend to split-the-difference between the parties' final offers with virtually no evidence of systematic reference to the facts of the cases. However, since there is a substantial amount of unexplained variance in the arbitration decisions, this evidence of mechanical compromise behavior should be viewed as characterizing the overall operation of conventional arbitration mechanisms and not the behavior of individual arbitrators in any particular case. Indeed, the results are consistent with the view that individual arbitrators pay close attention to the facts of the cases, but that there is considerable variation in the structure of different arbitrators' preference functions.
Keywords: arbitration; arbitrator behavior; final offers; mechanical compromise
JEL Codes: J52; K23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Final offers (D44) | Arbitrators' decisions (J52) |
| Final offers and case facts (Y20) | Arbitrators' decisions (J52) |