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American Economic Journal: Microeconomics: Vol. 3 No. 1 (February 2011)
AEJ: Micro Volume. 3, Issue 1 | 
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A Welfare Analysis of Arbitration
Article Citation
Olszewski, Wojciech. 2011. "A Welfare Analysis of Arbitration."
American Economic Journal: Microeconomics,
3(1): 174-213.
DOI: 10.1257/mic.3.1.174
DOI: 10.1257/mic.3.1.174
Abstract
The paper compares conventional and final-offer arbitration. One party is supposed to make a payment to another party, whose amount depends on a state. Under one scenario, parties obtain signals about the state, which cannot be recognized by the opponents. If the arbitrator's ability of recognizing signals is high, the frequency of requesting arbitration is lower under conventional than under final-offer
arbitration. If this ability is low, final-offer arbitration dominates conventional arbitration in quite a similar sense. Under the second scenario, parties believe that their opponents have wrong signals. Then, conventional arbitration approximates the original outcome better than final-offer arbitration. (JEL C78, D82, D86, J52)
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Authors
Olszewski, Wojciech (Northwestern U)
JEL Classifications
C78: Bargaining Theory; Matching Theory
D82: Asymmetric and Private Information
D86: Economics of Contract: Theory
J52: Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining
D82: Asymmetric and Private Information
D86: Economics of Contract: Theory
J52: Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining
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