Divergent expectations as a cause of disagreement in bargaining: Evidence from a comparison of arbitration schemes

Henry S. Farber, Max H. Bazerman

Research output: Contribution to journalArticle

35 Scopus citations

Abstract

The fact that settlement rates are much higher, where final-offer arbitration rather than conventional arbitration is the dispute settlement procedure, is used as the basis of a test of the role of divergent and relatively optimistic 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.

Original languageEnglish (US)
Pages (from-to)99-120
Number of pages22
JournalQuarterly Journal of Economics
Volume104
Issue number1
DOIs
StatePublished - Feb 1989
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

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