Interest Arbitration and the Incentive to Bargain

Abstract

This article develops an asymmetric information model of final-offer arbitration. If the union negotiator has superior information about the bargaining environment, then the union rank and file may find it in their best interest to require their negotiator to go to arbitration some of the time. In a simple two-state model, it is shown that if arbitration is rational for the union rank and file, it will occur only in the state where the bargaining environment is unfavorable to the union.