Arbitrator Decision Making: When are Final Offers Important?

Abstract

Analysis of the wages awarded by 64 arbitrators in 25 simulated interest arbitration cases strongly supports a model in which arbitrators, in determining an award, are influenced both by the facts of the case and by the offers of the parties. The arbitrators clearly weighted the facts more heavily than the offers in all cases. In addition, the importance of the facts relative to the offers increased as the offers diverged, suggesting that arbitrators' decisions were influenced more by reasonable offers than by unreasonable offers. The results contradict the naive split-the-difference view of arbitrator behavior in conventional arbitration that has led to the development of final-offer arbitration.