DOES FACT‐FINDING PROMOTE SETTLEMENT? THEORY AND A TEST | Zendy

Dickinson David L. | Zendy; Hunnicutt Lynn | Zendy

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DOES FACT‐FINDING PROMOTE SETTLEMENT? THEORY AND A TEST

Author(s) -

Dickinson David L.,

Hunnicutt Lynn

Publication year - 2005

Publication title -

economic inquiry

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.823

H-Index - 72

eISSN - 1465-7295

pISSN - 0095-2583

DOI - 10.1093/ei/cbi027

Subject(s) - dominance (genetics) , settlement (finance) , economics , focal point , outcome (game theory) , human settlement , point (geometry) , bargaining power , test (biology) , microeconomics , engineering , finance , cardinal point , biochemistry , chemistry , physics , geometry , mathematics , optics , gene , waste management , paleontology , biology , payment

Nonbinding recommendations, such as provided by fact‐finders, are shown to significantly increase voluntary settlements in bargaining. Theoretically, it is unclear whether recommendations will increase settlement rates. A recommendation may reduce outcome uncertainty, thereby “chilling” bargaining and increasing dispute rates. On the other hand, a recommendation may give the parties a focal point around which an agreement is made. Which of these effects dominates is a question that we consider using theory and data from controlled bargaining experiments. The data show the dominance of a focal point effect for suggestions, highlighting their potential role in improving dispute settlement procedures.(JEL C78 , C92 , J52 )

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