Arbitration systems and negotiations

We consider a model of bargaining by concessions where agents can terminate negotiations by accepting the settlement of an arbitrator. The impact of pragmatic arbitrators—that enforce concessions that precede their appointment—is compared with that of arbitrators that act on principle—ignoring prior concessions. We show that while the impact of arbitration always depends on how costly that intervention is relative to direct negotiation, the range of scenarios for which it has an impact, and the precise effect of such impact, does change depending on the behavior—pragmatic or on principle—of the arbitrator. Moreover the requirement of mutual consent to appoint the arbitrator matters only when he is pragmatic. Efficiency and equilibrium are not aligned since agents sometimes reach negotiated agreements when an arbitrated settlement is more efficient and vice versa. What system of arbitration has the best performance depends on the arbitration and negotiation costs, and each can be optimal for plausible environments.      

Legal and Procedural Strategies for Employees Utilizing Arbitration for Statutory Disputes

This article § reviews the current United States law regarding arbitration of statutory disputes in the nonunion employment setting. The article is a literature review and offers no new research findings but rather focuses on the important legal and procedural strategies employees may use throughout the arbitration process. The article specifically advises the reader on selection of an attorney, selection of an arbitrator, selection of a third party administrator, the discovery process, and the requisite hearing procedure. Possible challenges to the arbitration process are also discussed. In addition, the article focuses on the advantages and disadvantages of arbitration from an employee's point of view.     

An investigation of managerial interventions in employee disputes

Seventy four university managers described up to six recent conflicts and reported on their intervention strategies. Findings show that managers use a range of strategies, including overlooking, as interventions for employees’ disputes, instead of favoring the use of any particular one. Choices of intervention strategies were influenced by the type of issue being disputed, the seriousness of the dispute, and managers’ self-efficacy with mediation. Specifically, managers most frequently used mediation to resolve task-related disputes, and tended to use a variety of different strategies to intervene in personality conflicts. When managers perceived conflicts to be highly serious, they most frequently used mediation, followed by arbitration, offering incentives, and lastly, overlooking. Managers with a high degree of mediation self-efficacy more frequently mediated employees’ disputes, whereas managers with a low degree of mediation self-efficacy more frequently overlooked employees’ disputes. Theoretical and practical implications of these findings are discussed.     

Bargaining power and the structure of salaries in major league Baseball

The relationship between bargaining power and the structure of salaries in major league baseball has been a subject of much empirical study. The evidence provided in this paper suggests that eligibility for final-offer arbitration does not result in a ‘fixed’ reduction in monopsonistic exploitation. Rather, the level of exploitation diminishes markedly in the first season of eligibility and continues to decrease in subsequent seasons. By the time the player reaches free agency eligibility, he can expect to earn the same single-season salary that he would as a free agent.     

An arbitrator looks at grievance arbitration

This article is an overview of the major considerations that are crucial in the thought processes of an arbitrator in deciding a grievance-arbitration case. An arbitrator’s first obligation is to interpret and apply provisions of the labor agreement in a manner consistent with the intent of the parties. Past practices or precedents are often considered by arbitrators to assess the intent of the parties and to decide certain issues. The most subjective area confronting arbitrators is that of fairness and equity, primarily in discipline/discharge matters where just cause must be demonstrated. Most arbitrators apply the preponderance of evidence standard as the required burden of proof in deciding equity matters. Consistency in handling of prior cases and documentation are especially important in an arbitrator’s weighing of evidence. In summary, grievance arbitration is an extension of democratic due process to the industrial and business world. This article was prepared for presentation at a seminar sponsored by the American Management Foundation, May 6–7, 1993 (Chicago, Illinois). It is a revised, updated version of an article that originally appeared in the October, 1978 issue ofPersonnel Journal.     

Arbitrators’ characteristics and decision-making records,gender of arbitrators and grievants,and the presence of legal counsel as predictors of arbitral outcomes

Labor arbitration helps define employee and employer rights and responsibilities. Evidence indicates that the advocates at arbitration tend to concern themselves with issues unrelated to the facts of the case or to the rights and responsibilities of the parties involved. More specifically, before the hearing, management and union advocates often dwell on issues such as the importance of the arbitrators’ personal characteristics and their decision-making history, the likely effects of the gender of arbitrators and grievants, and whether the presence of legal counsel impacts the arbitral outcomes. The purpose of this study is to examine whether these non-case-related factors actually can be associated with differing awards by arbitrators. This study may be the first in which the arbitrators’ decision-making history (award orientation) is a primary issue. Of all the issues studied, the arbitrator’s disciplinary award orientation is the only one with a consistent impact on arbitral outcomes. We conclude that the energy and resources expended by the advocates concerning non-case-related issues would be better spent in preparing their cases for arbitration and in examining the potential impact of arbitration on the rights and responsibilities of management and its employees.     

Are baseball players paid their marginal products?

Previous researchers found that baseball players under the reserve clause had been paid considerably less than their contributions to club revenues. We ask, has the new contractual system of free agency and final-offer arbitration brought baseball salaries into line with marginal revenue products? Using public data for the 1986 and 1987 seasons, our basic answer is yes, major league salaries generally coincide with estimated marginal revenue products, though significant deviations exist. Experienced players are paid in accord with their productivity; young players, however, are paid less than their marginal revenue product, on average. This result is closely related to the market structure within baseball.     

Case characteristics affecting the method of grievance dispute settlement

In 1986, we reported the results of an attempt to model the inner, workings of grievance arbitration. We concluded that the primary determinant of whether or not a grievance is settled privately or through arbitral award is the degree of private, outside legal representation. This article extends that work. Utilizing a more sophisticated statistical technique with a better specified list of explanatory variables, it identifies two additional grievance case characteristics that influence the method of grievance settlement: case complexity and type of dispute. The probability of an arbitrated settlement is greatest where the issue is simple and involves discipline and where the parties are represented by private, outside attorney advocates.     

The flypaper effect and political strength

Simple models of local government behavior predict equal effects of private income and unconditional federal grants on local government expenditures. Numerous empirical analyses, however, find that the effect of grants is larger than the income effect. We argue that this flypaper effect may be a result of weak political leaderships in multi–issue and multi–party decision–making environments. In multi–issue institutions, a strong political leadership may reduce inefficiency due to interest group influence and inter–party bargaining in the local council. Utilizing data for Norwegian local governments in the 1930s, we find that political strength reduces the size of the flypaper effect. When the local council consists of only one political party, we cannot reject absence of a flypaper effect, while the flypaper effect is large in fragmented local councils. Received: June 2000 / accepted: February 2001     

Bargaining solutions with non-standard objectives

I examine the pure-strategy solutions of the sealed-bid bargaining game with incomplete information, when the buyer's and seller's objectives are other than the standard objective, namely maximization of expected profit. The motivation for this exploration lies in three problems of the standard formulation: the necessity of assuming common priors, the existence of uncountably many Nash equilibria, with no means for the players to coordinate on any one of them, and the uncertain relationship between these equilibria and observed behavior in bargaining experiments. Specifically, I consider two alternative objectives: minimization of maximum regret, and maximization of maximum profit. The solution concept here is not Nash equilibrium, but rather -individually rational strategy bundle. For that reason, I shall, where appropriate, use the word “solution” in place of “equilibrium.” Yet we find that the notion of Nash Equilibrium reappears, in a sense to be explained. In the minimax-regret case I find (in contrast to the case of expected profit) a unique solution; this solution reduces, for priors with coincident support, to the linear equilibrium of Chatterjee-Samuelson. In the maximum-profit case there are many solutions; they turn out to be slight generalizations of the one-step equilibria of Leininger-Linhart-Radner.     

Optimal procurement mechanisms for divisible goods with capacitated suppliers

Procurement auction literature typically assumes that the suppliers are uncapacitated [see, e.g. Dasgupta and Spulber in Inf Econ Policy 4:5–29, 1990 and Che in Rand J Econ 24(4):668–680, 1993]. Consequently, the auction mechanisms award the contract to a single supplier. We study mechanism design in a model where suppliers have limited production capacity, and both the marginal costs and the production capacities are private information. We provide a closed-form solution for the revenue maximizing direct mechanism when the distribution of the cost and production capacities satisfies a modified regularity condition [Myerson in Math Oper Res 6(1):58–73, 1981]. We also present a sealed low bid implementation of the optimal direct mechanism for the special case of identical suppliers. The results in this paper extend to other principle-agent mechanism design problems where the agents have a privately known upper bound on allocation. The authors would like to thank the anonymous referees for valuable suggestions and comments.     

The tests of just cause: What price predictability in arbitral decision making?

The common law of just cause consists of the accumulated decisions of the arbitration profession rendered on the basis of commonly accepted principles of right and wrong. It constitutes the rules of the arbitration game pertaining to just cause, and, as such, guides decision making in disciplinary dispute resolution. Presumably it brings predictability to this aspect of arbitral decision making much as the principles of contract law bring predictability to nondisciplinary contract construction disputes. The best known component of this body of law is the checklist of seven tests devised by Carrol R. Daugherty. This article examines this element of common law, its origins, and whether it does, in fact, bring grater predictability to the disciplinary phase of arbitral decision making and, if so, at what cost. Besides questioning the degree of predictability achieved by Daugherty's tests, the paper cautions that greater predictability may only be possible at an unacceptably high cost: the sacrifice of those characteristics that make arbitration the preferred dispute resolution technique.     

The <Emphasis Type="Italic">n</Emphasis>-person Kalai-Smorodinsky bargaining solution under pre-donations

This study examines the behavior of simple n-person bargaining problems under pre-donations where the Kalai-Smorodinsky (KS) solution is operant. Pre- donations are a unilateral commitment to transfer a portion of one’s utility to someone else, and are used to distort the bargaining set and thereby influence the bargaining solution. In equilibrium, these pre-donations are Pareto-improving over the undistorted solution; moreover, when the agents’ preferences are sufficiently distinct, the equilibrium solution coincides with the concessionary division rule.     

Public Sector Employee Discipline: Comparing Police to Other Public Sector Employees

This study compares the disciplinary process for police vs. nonpolice public employees. A random sample of 200 cases was drawn from the 806 public sector discipline cases published in volumes 111–118 of Labor Arbitration Reports. Case characteristics, classification of conduct unbecoming, proposed discipline, arbitrator behavior, reasons for reversing management’s penalty other than conduct unbecoming, procedural outcomes and findings were analyzed. The frequency of the finding for the employer was actually higher for police than for the nonpolice cases. Managerial actions that resulted in reversing the disciplinary penalty were not as suggested by the literature. Multivariate analyses of the case characteristics led to the conclusion that police discipline may have been distinctive from nonpolice public employee discipline in the past, but is no longer so distinctive.

Determinants of Economic Interaction: Behavior or Structure

Experimental economics originated as examination of the behavior of aggregate phenomena, especially markets, populated by human participants motivated by their desire to attain their goals. The past two decades have brought two newer trends. One is a gradual but steady shift in the focus of the questions sought to be addressed through human experiments towards examination of micro level phenomena – individual preferences and behavior. The second is the expansion in the role of computer simulations to examine questions about aggregate level phenomena. This shift to individual behavior has accentuated the ever-present dilemma of social sciences in trying to be a science on one hand, and to understand our own self-conscious selves – human beings – on the other. To address this dilemma, it would be useful to recognize three streams of experimental economics: (1) macro stream to examine the properties of social structures, (2) micro stream to examine the behavior of individuals, and (3) agent stream to explore the links between the micro and macro phenomena using computer simulations. At least the structural stream can be firmly rooted in the tradition of sciences (bypassing the free-will dilemma of social sciences), while the agent stream can span the gap between the behavioral and structural streams.The author is thankful to Dorota Dobija and Juergen Huber for their helpful comments. Science does not know its debt to imagination. – Ralph Waldo Emerson Vivisection is a social evil because if it advances human knowledge, it does so at the expense of human character. – George Bernard Shaw The theoretical broadening which comes from having many humanities subjects on the campus is offset by the general dopiness of the people who study these things. – Richard P. Feynman Economics has an amazing capacity to summarize staggeringly complex phenomena by the application of only a handful of principles. – Charles R. Plott Being outside and above individual and local contingencies, collective consciousness sees things only in their permanent and fundamental aspects, which it crystallizes in ideas that can be communicated. – Emile Durkheim     

Mechanism design goes to war: peaceful outcomes with interdependent and correlated types

In this paper, we consider the possibility of identifying peaceful mechanisms such as bargaining protocols, international institutions, or norms that can enable countries to settle disputes in the absence of binding contracts. In particular, we are interested in the existence of mechanisms with zero probability of war. Here, we focus on situations where the countries’ payoffs to war are interdependent or correlated and where efficient settlements are not required but subsidies are unavailable. Most importantly, countries can choose to go to war at any time and can use information learned from the negotiation process in making this choice. We characterize the conditions under which no peaceful mechanisms exist and discuss how weakening our war consistency condition can change this result. We thank Massimo Morelli, Adam Meirowitz, Hein Goemans and two anonymous reviewers for helpful advice and comments and John Duggan and Dan Bernhardt for encouraging this direction of inquiry.     

Final Offer Arbitration in theory and practice

This article examines the theoretical foundations of Final Offer Arbitration (FOA). The use of arbitration in Britain is compared with other types of third party intervention, and the strengths and weaknesses of FOA are critically examined and compared with conventional arbitration. It is concluded that FOA has much to commend it, both in theory and in practice, and is particularly suitable for ‘disputes of interest’.     

The Arbitration of Labor Disputes in China Today: Definition and Implications

Over the past 12 years China has strongly encouraged the use of a formalized arbitration process to resolve, among other conflict areas, labor disputes. Using a formal resolution process is meant to calm labor unrest by giving employees both individual and collective voices in workplace issues. Ultimately, China recognizes that, as did the United States with passage of the National Labor Relations Act, giving employees voice quells potential social revolution and helps business by making use of employee ideas while attracting the best employees. This paper discusses some history of the Chinese labor dispute resolution process and its specific provisions promulgated in two laws and a set of regulations. Strengths and weaknesses of the process are enumerated and the importance of the process to foreign investors, employers, and employees is laid out.     

简论事业单位的人事与劳动纠纷

事业单位人事纠纷与劳动纠纷自成立之日起便以有之。工作中存在与发生的矛盾、分歧与争议无时不在。上级与下级之间、员工与领导之间、人与机构之间、单位与人事机构之间存在与发生的纠纷、矛盾基本上通过党组织、行政命令、政策、甚至个人权利威望与影响力来解决。这些人事矛盾基本上在内部消化,几乎从未没有公开。而到了21世纪的今天,由于政治与民主法制进程加快,以及人事制度的悄然进行,这种矛盾日益公开。那么化解这种矛盾究竟是适用劳动仲裁还是人事仲裁仍然存在很多问题。文中对事业单位人事纠纷和劳动纠纷的危害及产生的问题根源进行较为深刻的剖析,针对事业单位的性质以及与企业的区别,提出了事业单位所适用的相关法律及相关建议。