Nonbinding Suggestions and Dispute Rates: Uncertainty, Focal Points, and their Effects on Bargaining Outcomes (ICPSR 25323)

Version Date: Sep 27, 2010 View help for published

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David Dickinson, Appalachian State University; Lynn Hunnicutt

https://doi.org/10.3886/ICPSR25323.v1

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This paper focuses on the effects of nonbinding recommendations on bargaining outcomes. Recommendations are theorized to have two effects: they can create a focal point for final bargaining positions, and they can decrease outcome uncertainty should dispute persist. While the focal point effect may help lower dispute rates, the uncertainty reduction effect is predicted to do the opposite for risk-averse bargainers. Which of these effects dominates is of critical importance in the optimal design of alternative dispute resolution (ADR) procedures, which are becoming increasingly utilized to help resolve disputes in a variety of settings. We theoretically examine the effects of recommendations on the bargaining contract zone. Our theoretical framework, which allows bargainers' final positions to influence a binding outcome should negotiations fail, provides for a more stringent test of focal points than previously considered. We also present data from controlled laboratory bargaining experiments that are consistent with our model of recommendation effects. Recommendations are empirically shown to influence final bargaining positions and negotiated settlement values. Furthermore, dispute rates are significantly lower when one includes recommendations, even where the recommendation is completely ignored in final-stage arbitration. This highlights a potentially significant role for the use of nonbinding procedures, such as mediation, as a preliminary stage in developing more efficient ADR procedures.

Dickinson, David, and Hunnicutt, Lynn. Nonbinding Suggestions and Dispute Rates: Uncertainty, Focal Points, and their Effects on Bargaining Outcomes. Inter-university Consortium for Political and Social Research [distributor], 2010-09-27. https://doi.org/10.3886/ICPSR25323.v1

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National Science Foundation (0316414)
Inter-university Consortium for Political and Social Research
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2010-09-27

2018-02-15 The citation of this study may have changed due to the new version control system that has been implemented. The previous citation was:

  • Dickinson, David, and Lynn Hunnicutt. Nonbinding Suggestions and Dispute Rates: Uncertainty, Focal Points, and their Effects on Bargaining Outcomes. ICPSR25323-v1. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2010-09-27. http://doi.org/10.3886/ICPSR25323.v1

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