A common defnition of a labor union is that it is an association of workers who
bargain collectively with their employer regarding the terms and conditions of
employment. Economic analysis of labor unions falls largely into four related
categories: 1) unions as maximizing agents, 2) dispute resolution: strikes and
arbitration, 3) the effect of unions on wages, and 4) the determination of union
membership. This essay is organized around discussions of these topics.

In negotiations where disputes are resolved via adjudication (as in the courts or
arbitration), beliefs about a potential adjudicated outcome are central in determining the
bargaining environment. The present research investigates how negotiators (trial attorneys and
students) involved in a hypothetical product liability case use information about adjudicated
outcomes regarding the amount of damages in previous similar cases in forming beliefs about
their own case. In particular, we examine how the parameters of the distribution of previous
outcomes (variance and range) contribute to the differences between the expected outcome and
the parties’ reservation values. We find that the range of earlier outcomes has no significant
effect on subjects’ reservation values but that the variance does have a systematic effect,
particularly on plaintiffs’ behavior.
A pair of separate findings may have important implications for the negotiation process.
First, whether or not subjects exhibited risk averse behavior depended on the role to which they
were assigned in a way that is consistent with the risk attitudes and framing notion implied by
Kahneman and Tversky’s prospect theory (1979). Second, only subjects assigned to roles for
which they had extensive experience exhibited over-optimism about the likely outcome.

This paper is a non-technical survey of the results of recent quan-
titative analyses of interest arbitration systems operating in the U.S.
It contains a review of the broader context in which arbitration has
become a feature of public sector wage determination, and surveys of
quantitative studies of arbitrator selection and decision—making in
simulation experiments and in practice. For reasons that still remain
unclear, simple statistical analyses continue to confirm a very stable
set of operating characteristics for these systems. The data suggest
that the variability in the outcomes that exists across arbitration
systems is a product either of constraints placed on arbitrator
decisions by the institutional setup or of differences in the behavior
of the parties in response to different institutional setups, and not of
differences in arbitrator behavior.

In this study we examine the experience of a single large hospital with an
informal pre-litigation “complaint” process that resolves some cases outside of the legal
system. The empirical results are generally consistent with an information structure where
patients are poorly informed about the quality of medical care and the hospital does not
know whether particular patients are litigious or not. The complaint process seems to
resolve many complaints in a less costly manner than filing lawsuits. Almost half of all
complaints are resolved before a lawsuit is filed. The large majority of these are dropped,
and they are cases that would likely have been dropped even if they had been initiated as
lawsuits. Very few cases are settled with a cash payment to patients before a lawsuit is
filed, suggesting that patients must file lawsuits in order to convince the hospital that they
are litigious enough to justify a settlement. Cases initiated through the complaint process
are not resolved (dropped, settled, tried to a verdict) significantly differently from cases
initiated as lawsuits, controlling for observable case characteristics. When settlements
of lawsuits occur, the amounts paid do not vary depending on how the case originated,
but settlements of complaints are much higher for cases settled after a lawsuit is filed.
We conclude that the complaint process is a cost-effective “front-end” for the litigation
process that provides information to patients regarding the quality of their medical care
and, hence, the likelihood of negligence.