David Bloom

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This paper contains some early results of a longer term empirical
study of a New Jersey arbitration statute that covers police officers and
firefighters. The purpose of this larger study is twofold. First, we hope
to shed some light on how differences in the structure of arbitration
mechanisms affect the size and frequency of negotiated settlements as well
as arbitration outcomes. This is possible in New Jersey because the same
panel of arbitrators administers both final—offer and conventional arbitra-
tion systems simultaneously. Second, it is our view that arbitration
systems share much in common with other judicial and quasi-judicial dispute
settlement mechanisms. It is our hope to shed some light on the more
general issues surrounding the design and evaluation of these systems
through the much needed empirical study of the operation of one such
system. In this paper we report some important results for the interpreta-
tion and evaluation of arbitrator impartiality under the New Jersey sta-
tute. We suspect these results are equally relevant for the interpretation
of other arbitration experiences.

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Citation Key
Ashenfelter, O. ., & Bloom, D. . (1983). The Pitfalls in Judging Arbitrator Impartiality by Win-Loss Tallies Under Final-Offer Arbitration. Retrieved from http://arks.princeton.edu/ark:/88435/dsp015h73pw05m (Original work published May 1983)
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Our purpose in this paper is to open up the empirical analysis of
some simple models of arbitrator behavior under alternative mechanisms and
in different economic environments. We do this by studying the outcomes of
the first two years of operation of a New Jersey statute that mandates the
arbitration of unsettled pay disputes by New Jersey police officers and
the municipalities that employ them. This remarkable statute provides for
conventional arbitration of pay disputes if the two parties can agree to
this, but requires the use of final-offer arbitration if they cannot. Con-
sequently, the results of both mechanisms may be analyzed and compared.
Although further evidence from the New Jersey experience with an
arbitration statute is necessary before firm conclusions should be drawn,
several preliminary results of the empirical analysis are worth empha-
sizing. First, the New Jersey system does seem to confront the parties
with considerable uncertainty about the arbitration decisions they can
expect. The mean of arbitrator's preferred awards is apparently closely
related to alternative local wage settlements, but these decisions still
contain considerable variability around this mean. Second, the union final
offers have thus far been very conservative relative to the distribution of
arbitrator's preferred settlements. This is demonstrated both by (a) the
low values of union and employer final offers relative to the mean of con-
ventionally arbitrated settlements, and by (b) the high correlation between
the incidence of employer victories and the mean of union and employer final
offers. The result is that a high proportion of union offers are being
accepted by arbitrators and this proportion is predictable from the data
on conventionally arbitrated outcomes alone. Whether this state of affairs simply reflects the risk aversion of the parties or a mistaken view by the
parties of what arbitrators will allow is an important subject for further
research. If the latter is the case the central tendency of future arbi-
trated settlements may be considerably greater than has heretofore been
seen, but employer victories are also likely to become considerably more
numerous. In either case, our empirical results suggest that the form of
the arbitration system adopted may have a considerable impact on the size
of arbitration awards.

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Citation Key
The American Economic Review, Vol. 74, No. 1, March 1984
Ashenfelter, O. ., & Bloom, D. . (1981). Models of Arbitrator Behavior: Theory and Evidence. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01hd76s0061 (Original work published November 1981)
Working Papers

This study investigates the effect of final-offer arbitration on
the salaries of municipal police officers in New Jersey using a regression
model to control for the possible biases introduced by non-random use of
the procedure. The results indicate that, despite the greater fraction
of union victories than employer victories under final-offer arbitration,
arbitrated salary settlements are not significantly higher or lower than
nonarbitrated settlements. The results also contain evidence of asymmetric
behavior by the parties under final-offer arbitration with the unions
appearing more risk averse than the employers.

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Citation Key
Bloom, D. . (1980). The Effect of Final Offer Arbitration on the Salaries of Municipal Police Officers in New Jersey. Retrieved from http://arks.princeton.edu/ark:/88435/dsp011544bp10v (Original work published May 1980)
Working Papers

The goal of this paper is to explore the possibility that the costs
and benefits of legal representation are structured so that each individual
party seeks legal representation in the hope of exploiting the other party,
while knowing full well that failing to do so will open up the possibility
of being exploited. The first part of the paper shows how the structure of
the incentives faced by the parties may be estimated, and the second
describes the results of empirical tests in several different settings.
The empirical results strongly suggest that the parties do face "prisoner's
dilemma" incentives, although no attempt is made to determine whether the
parties respond to these incentives.

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Ashenfelter, O. ., & Bloom, D. . (1990). Lawyers as Agents of the Devil in a Prisoner’s Dilemma Game. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01h128nd70z (Original work published September 1990)
Working Papers

Do the parties in a typical dispute face incentives similar to those in the classic prisoner’s dilemma game? In this paper, we explore whether the costs and benefits of legal representation are such that each party seeks legal representation in the hope of exploiting the other party, while knowing full well that failing to do so will open up the possibility of being exploited. The paper first shows how it is possible to test for the presence of such an incentive structure in a typical dispute resolution system. It then reports estimates of the incentives for the parties to obtain legal representation in wage disputes that were settled by final-offer arbitration in New Jersey. The paper also reports briefly on similar studies of data from discharge grievances, courtannexed
disputes in Pittsburgh, and child custody disputes in California. In each case, the data provide evidence that the parties face strong individual incentives to obtain legal representation which makes the parties jointly worse off. Using our New Jersey data, we find that expert agents may well have played a productive role in moderating the biases of their clients, but only early on in the history of the system. Over time, the parties slowly evolved to a non cooperative equilibrium where the use of lawyers becomes nearly universal, despite the fact that agreeing not to hire lawyers is cheaper and does not appear to alter arbitration outcomes.

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Ashenfelter, O. ., Bloom, D. ., & Dahl, G. . (2013). Lawyers as Agents of the Devil in a Prisoner’s Dilemma Game. Retrieved from http://arks.princeton.edu/ark:/88435/dsp01pr76f348m (Original work published April 2013)
Working Papers