THE ROLE OF ARBITRATION COSTS AND RISK-AVERSION IN DISPUTE OUTCOMES

The effects of risk aversion and of arbitration costs on bargaining outcomes are investigated using data from 171 simulated negotiations. The results are generally consistent with predictions from a simple economic bargaining model. We find strong evidence that directs costs of arbitration lead to higher rates of agreement. There is only weak evidence the risk aversion is related to the probability of agreement, but negotiated settlements seems to favor the less risk‐averse bargainer. Copyright © 1990, Wiley Blackwell. All rights reserved