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Divergent Expectations as a Cause of Disagreement in Bargaining: Evidence From a Comparison of Arbitration Schemes

Henry S. Farber¹; Max H. Bazerman²

¹ Massachusetts Institute of Technology · ² Northwestern University

The fact that settlement rates are much higher, where final-offer arbitration rather than conventional arbitration is the dispute settlement procedure, is used as the basis of a test of the role of divergent and relatively optimistic expectations in causing disagreement in negotiations. Calculations of identical-expectations contract zones using existing estimates of models of arbitrator behavior yield larger identical-expectations contract zones in conventional arbitration than in final-offer arbitration. This evidence clearly suggests that divergent expectations alone are not an adequate explanation of disagreement in labor-management negotiations. A number of alternative explanations for disagreement are suggested and evaluated.

DOI

10.2307/2937836

Volume

104 (1)

Pages

99

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