We develop a signaling model of final offer arbitration (FOA) in which the informed party makes the final settlement demand to the uninformed party. In FOA, each party submits a proposal to an arbitrator and if no agreement is reached, the arbitrator must select one of the two submitted proposals. We analyze a “before” model of FOA in which all settlement activity occurs prior to the exchange of proposals. We characterize the pure strategy separating, equilibrium associated with this game. Relative to a model of conventional arbitration (CA), the pure strategy separating equilibrium is associated with a higher dispute rate because weak player types have an enhanced incentive to bluff in this setting. This result continues to hold in semi-pooling equilibria. Thus our model is consistent with a higher dispute rate in FOA compared to CA. We also compare the incentive to engage in costly voluntary disclosure and costly discovery (JEL K4, C7, J52).

中文翻译：

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最终报价仲裁的“之前”模型中的信号

我们开发了最终报价仲裁 (FOA) 的信号模型，其中知情方向未知情方提出最终结算要求。在 FOA 中，各方向仲裁员提交提案，如果未达成协议，仲裁员必须从提交的两个提案中选择一个。我们分析了 FOA 的“之前”模型，其中所有结算活动都发生在提案交换之前。我们描述了与该博弈相关的纯策略分离均衡。相对于传统仲裁 (CA) 模型，纯策略分离均衡与更高的争议率相关，因为弱玩家类型在这种情况下有更强的诈唬动机。这一结果在半池均衡中继续成立。因此，与 CA 相比，我们的模型与 FOA 中更高的争议率一致。