Arbitrator Behavior

Abstract

Arbitration systems are often used to resolve labor disputes because on-going employment relationships are likely to contain specific (human capital) investments. Recent research indicates that the ex ante acceptability of arbitration to the parties must depend, in part, on the unpredictability of the arbitrator's award. It is shown that the usual selection process for arbitrators does imply that arbitrator decisions should be statistically exchangeable (in the limit), and the evidence available to date supports this hypothesis.