Bargaining and information: An empirical analysis of a multistage arbitration game

We conduct an experimental analysis of final offer arbitration (FOA) with d ifferentially informed players. Under FOA, the arbitrator must choose one o f the two submitted offers. In our control, the uninformed player makes an offer to the informed player prior to the submission of offers to the arbit rator. The treatment allows negotiation after offers are submitted to the a rbitrator. Because these offers are potentially binding, they may transmit privately held information and, thereby, lower the dispute rate, We find th at allowing negotiation in the face of potentially binding offers lowers th e dispute rate by 27 percentage points.