An Experimental Comparison of Dispute Rates in Alternative Arbitration Systems

Orley Ashenfelter, Janet Currie, Henry S. Farber, Matthew Spiegel

NBER Working Paper No. 3417
Issued in August 1990
NBER Program(s):Labor Studies

This paper reports the results of a systematic experimental comparison of the effect of alternative arbitration systems on dispute rates. The key to our experimental design is the use of a common underlying distribution of arbitrator "fair" awards in the different arbitration systems. This allows us to compare dispute rates across different arbitration procedures where we hold fixed the amount of objective underlying uncertainty about the arbitration awards.

There are three main findings. First, dispute rates are inversely related to the monetary costs of disputes. Dispute rates were much lower in cases where arbitration was not available so that the entire pie was lost in the event of dispute. Second, contrary to conventional wisdom, the dispute rate in a final-offer arbitration system is at least as high as the dispute rate in comparable conventional arbitration system. Third, dispute rates are inversely related to the uncertainty costs of disputes. Dispute rates were lower in conventional arbitration treatments where the variance of the arbitration award was higher and imposed greater costs on risk-averse negotiators. Our results can also be interpreted as providing tentative evidence that the negotiators were risk-averse on average.

download in pdf format
   (303 K)

download in djvu format
   (257 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3417

Published: Econometrica, vol. 60, no. 6 (November 1992) pp. 1407-1433. citation courtesy of

Users who downloaded this paper also downloaded* these:
Dow and Gorton w4314 Arbitrage Chains
Fung and Staiger w4847 Trade Liberalization and Trade Adjustment Assistance
Altonji and Williams w4133 The Effects of Labor Market Experience, Job Seniority, and Job Mobility on Wage Growth
Pindyck and Rotemberg w3324 Do Stock Prices Move Together Too Much?
Ashenfelter and Bloom w1149 Models of Arbitrator Behavior: Theory and Evidence
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us