We test for the presence of an addictive effect of arbitration
(positive state dependence) using data both from a laboratory bargaining
experiment and from the field. We find no evidence of state dependence in
the experimental data, and we find weak evidence of positive state dependence
in the field data on teachers in British Columbia. Hence, we reject the view
that use of arbitration per se leads to state dependence either through
reducing uncertainty about the arbitral process or through changing the
bargaining parties perceptions about their opponents. The results further
suggest that an explanation for any positive state dependence we find in the
British Columbia field data must lie in an aspect of the arbitration process
which is not captured by our simple experimental design.

This paper uses data from the 1990s to examine changes in the wages, employment, and
e¤ort of nurses in California hospitals following takeovers by large chains. The market for
nurses has been described as a classic monopsony, so that one might expect increases in rm
market power to be associated with declines in wages. However, a basic contracting model
predicts e¤ects on e¤ort rather than on wages, which is what we see in the data nurses
see few declines in wages following takeovers, but see increases in the number of patients per
nurse, our measure of e¤ort. We show that our results are also consistent with an extended
version of the monopsony model that considers e¤ort, and allows for revenue shifts following
a takeover. Finally, we nd that these changes are similar in the largest for-pro t and
non-pro t chains, suggesting that market forces are more important than institutional form.

This paper reports the results of a systematic experimental comparison
of the effect of alternative arbitration systems on dispute rates. The key to
our experimental design is the use of a common underlying distribution of
arbitrator "fair" awards in the different arbitration systems. This allows
us to compare dispute rates across different arbitration procedures where we
hold fixed the amount of objective underlying uncertainty about the
arbitration awards.
There are three main findings. First, dispute rates are inversely
related to the monetary costs of disputes. Dispute rates were much lower in
cases where arbitration was not available so that the entire pie was lost in
the event of a dispute. This confirms the empirical importance of the
so-called "chilling effect" on bargaining that has been conjectured is
produced by the adoption of arbitration systems. Second, the dispute rate in
a final—offer arbitration system is at least as high as the dispute rate in a
comparable conventional arbitration system. Contrary to the usual argument,
we find no evidence that final-offer arbitration eliminates the chilling
effect. Third, dispute rates are inversely related to the uncertainty costs
of disputes. Dispute rates were lower in conventional arbitration treatments
where the variance of the arbitration award was higher and imposed greater
costs on risk-averse negotiators. Our results can also be interpreted as
providing tentative evidence that the negotiators were risk—averse on
average. Finally, we find general agreement between the dispute rates in our
experiment and dispute rates found in the field in comparable settings.

It is generally recognized that possible gains from cooperation are
not always realized because negotiating parties sometimes fail to reach
agreement. Such negotiation failures are ex post inefficient and have long
defied economist's attempts to explain them. In this paper we discuss
breakdowns in collective bargaining when disputes are resolved by
compulsory arbitration. We argue that the study of arbitration offers
insights into the nature of negotiation failures which may be of general
interest.