Comparison of Arbitration Procedures: Models with Complete and Incomplete Information

This paper has focused on two types of arbitration procedures that are commonly used in the United States, especially in industrial disputes involving public safety personnel who are legally not permitted to strike. The conventional arbitration (CA) procedure gives the arbiter or arbitration panel complete authority to fashion a final award. The final-offer arbitration (FOA) procedure allows the arbiter only to choose one of the two final offers made by the parties. Though some empirical work has appeared comparing the two procedures, the theoretical analysis of the procedures is still incomplete. This paper has concentrated on the effect of uncertainty about the arbiter's preferences on the bargainers, while ignoring other aspects of the comparison such as permitting the arbiter to trade-off among bargaining issues.