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Amended Final-offer Arbitration Outperforms Final-offer Arbitration

Amended Final-offer Arbitration Outperforms Final-offer Arbitration Amended final-offer arbitration (AFOA) has been developed as an attractive alternative mechanism to final-offer arbitration (FOA). Under AFOA, more reasonable offers win, but the outcome is determined by the loser's offer and the arbitrator's value. In AFOA, disputants making extreme offers are penalized, thereby encouraging compromise. This article compares the theoretical and behavioral properties of AFOA and FOA. Controlled laboratory experiments indicate that AFOA significantly outperforms FOA, generating substantially greater prearbitration settlement. Consistent with theoretical predictions, offers converge under AFOA; however, FOA offers neither converge nor are consistent with theoretical predictions. This work suggests practitioners should consider adopting AFOA over FOA. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Law and Economics Review Oxford University Press

Amended Final-offer Arbitration Outperforms Final-offer Arbitration

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References (32)

Publisher
Oxford University Press
Copyright
Copyright © The Author 2007. Published by Oxford University Press on behalf of the American Law and Economics Association.
Subject
Articles
ISSN
1465-7252
eISSN
1465-7260
DOI
10.1093/aler/ahm012
Publisher site
See Article on Publisher Site

Abstract

Amended final-offer arbitration (AFOA) has been developed as an attractive alternative mechanism to final-offer arbitration (FOA). Under AFOA, more reasonable offers win, but the outcome is determined by the loser's offer and the arbitrator's value. In AFOA, disputants making extreme offers are penalized, thereby encouraging compromise. This article compares the theoretical and behavioral properties of AFOA and FOA. Controlled laboratory experiments indicate that AFOA significantly outperforms FOA, generating substantially greater prearbitration settlement. Consistent with theoretical predictions, offers converge under AFOA; however, FOA offers neither converge nor are consistent with theoretical predictions. This work suggests practitioners should consider adopting AFOA over FOA.

Journal

American Law and Economics ReviewOxford University Press

Published: Oct 19, 2007

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