Document Type
Working Paper
Publication Date
4-30-2015
College/Unit
Chambers College of Business and Economics
Document Number
15-19
Department/Program/Center
Economics
Abstract
Arbitration, as an alternative to litigation for contract disputes, reduces costs and time. While it has frequently been thought of as a substitute to pretrial bargaining and litigation, in fact, parties may be able to reach a settlement privately while engaged in the arbitration process. Consequently, the institutional design may influence the bargaining. We develop a theoretical model of pre-arbitration bargaining that is able to identify the impact of the institutional features on its success. A detailed data set from arbitration proceedings in Italy is analyzed. The exogenous heterogeneity in the composition of the panel of arbitrators allows us to illustrate its effect on bargaining. We show that the number of arbitrators used interacts with their experience and independence to reduce uncertainty and facilitate settlement.
Digital Commons Citation
Marselli, Riccardo; McCannon, Bryan C.; and Vannini, Marco, "Bargaining in the Shadow of Arbitration" (2015). Economics Faculty Working Papers Series. 152.
https://researchrepository.wvu.edu/econ_working-papers/152