An Economic Analysis of Final-Offer Arbitration as a Conflict Resolution Device

The purpose of this article is to examine the impact of the availability of final-offer arbitration on the collective bargaining process and its outcomes. If this technique is to act as an effective strike substitute, it should provide bargainers with incentives to negotiate agreements bilaterally and should distribute bargaining power in much the same manner as would the right to strike. Empirical evidence is provided to evaluate the operation of final-offer arbitration in terms of these attributes. On the basis of this evidence, it would appear that policy-makers should consider final-offer arbitration as an alternative device for resolving conflicts.