Access

You are not currently logged in.

Access your personal account or get JSTOR access through your library or other institution:

login

Log in to your personal account or through your institution.

Binding versus Final-Offer Arbitration: A Combination is Best

Steven J. Brams and Samuel Merrill, III
Management Science
Vol. 32, No. 10 (Oct., 1986), pp. 1346-1355
Published by: INFORMS
Stable URL: http://www.jstor.org/stable/2631705
Page Count: 10
  • Download ($30.00)
  • Cite this Item
Binding versus Final-Offer Arbitration: A Combination is Best
Preview not available

Abstract

A new procedure is proposed for settling disputes which combines binding arbitration (BA) and final-offer arbitration (FOA). Unlike either of the two pure procedures, combined arbitration (CA) induces the two parties to converge in making their final offers. Under BA, the arbitrator's settlement is binding on the two sides; under FOA, the arbitrator chooses the final offer of the party closer to what he/she considers a fair settlement. Under CA, FOA is used if the arbitrarotr's notion of a fair settlement falls between the two final offers or if the final offers converge or crisscross; otherwise, BA is used. When modeled as a two-person, zero-sum game of imperfect information, in which the two parties make final offers to maximize their expected payoffs-based on their perception of the arbitrator's probability distribution of fair settlements-convergence is to the median and constitutes a global equilibrium if the probability distribution is continuous, unimodal, and symmetric about the median. When the distribution is not symmetric or the two parties have different distributions, alternative solutions are derived-including one based on the parties' being within a "critical distance" of each other-and illustrated by examples. Alternatives to the arbitrator's decision calculus are considered, and questions about applying the new arbitration procedure are discussed.

Page Thumbnails

  • Thumbnail: Page 
1346
    1346
  • Thumbnail: Page 
1347
    1347
  • Thumbnail: Page 
1348
    1348
  • Thumbnail: Page 
1349
    1349
  • Thumbnail: Page 
1350
    1350
  • Thumbnail: Page 
1351
    1351
  • Thumbnail: Page 
1352
    1352
  • Thumbnail: Page 
1353
    1353
  • Thumbnail: Page 
1354
    1354
  • Thumbnail: Page 
1355
    1355