The contractual dispute resolution game: Real-effort experiments on contract negotiation and arbitration

Corgnet, Brice; Gächter, Simon; Hernán-González, Roberto

Abstract

In many contractual arrangements where product or service delivery occurs sometime after contracts have been concluded, conditions may change, leading to disputes that need to be resolved often by a third party (arbitrator/mediator). In this paper we introduce the Contractual Dispute Resolution Game (CDRG), which allows us to study dispute resolution through arbitration. Unlike prior research studying arbitration at impasse using zero-sum bargaining games, we analyze a situation where parties can create additional value. We introduce a novel real-effort task, the Car Assembly Real-effort Task (CART), and show in two studies how automated arbitration rules (Study 1) and human arbitrators (Study 2) affect dispute resolution and surplus creation. In Study 1, we find that high-accuracy arbitration enhances efficiency. In Study 2, we find that arbitrators who are incentivized based on the total surplus of the negotiation do also promote greater efficiency. The CDRG provides a valuable tool for examining the effects of arbitration and mediation in settings where contracts are incomplete and can be impacted by shocks.

Citation

Corgnet, B., Gächter, S., & Hernán-González, R. (2025). The contractual dispute resolution game: Real-effort experiments on contract negotiation and arbitration. Journal of Economic Behavior and Organization, 231, Article 106902. https://doi.org/10.1016/j.jebo.2025.106902

• Journal Article Type: Article
• Acceptance Date: Jan 25, 2025
• Online Publication Date: Jan 30, 2025
• Publication Date: 2025-03
• Deposit Date: Jan 31, 2025
• Publicly Available Date: Jan 31, 2025
• Journal: Journal of Economic Behavior & Organization
• Print ISSN: 0167-2681
• Electronic ISSN: 2328-7616
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 231
• Article Number: 106902
• DOI: https://doi.org/10.1016/j.jebo.2025.106902
• Keywords: Contractual disputes, Cooperation, Arbitration, Fairness, Risk-sharing, Laboratory experiments, Real-effort experiments, Car Assembly Real-effort Task (CART), Contractual Dispute Resolution Game (CDRG)
• Public URL: https://nottingham-repository.worktribe.com/output/44692012
• Publisher URL: https://www.sciencedirect.com/science/article/pii/S0167268125000228?via%3Dihub
• Additional Information: This article is maintained by: Elsevier; Article Title: The contractual dispute resolution game: Real-effort experiments on contract negotiation and arbitration; Journal Title: Journal of Economic Behavior & Organization; CrossRef DOI link to publisher maintained version: https://doi.org/10.1016/j.jebo.2025.106902; Content Type: article; Copyright: © 2025 The Authors. Published by Elsevier B.V.