Convergence or Divergence in Final-Offer Arbitration in Professional Baseball

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Abstract

Many labor relations practitioners and theorists believe that final-offer arbitration by a neutral third party encourages union and management officials to resolve their bargaining differences. However, decision scientists have found that there is no median convergence between the parties. Using professional baseball in our model, we test the assumption that major league owners tend to maximize expected monetary value (EMV), finding that claims of divergence are invalidated in dispute management contexts where there is a broad range of other motivations for settling. Decision models offer even further support for the use of final-offer arbitration in such settings.

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