The author is an associate professor in the Institute of Labor and Industrial Relations at the University of Illinois. He is grateful to the following people for their assistance in gathering data for this paper: Thomas Kochan, Gary Long, Richard Pegnetter, Dean Pruitt and Richard Seryak.
In the past decade final-offer arbitration has emerged first as an idea and then as a process used to resolve bargaining impasses in several public and private jurisdictions. Hundreds of negotiations have occurred under these final-offer procedures, and dozens of impasses have been resolved by arbitration awards. These experiences, when compared to conventional arbitration experiences, have shown that final-offer arbitration does a reasonably good job of protecting the parties' incentives to negotiate but that it does not operate as effectively as its theoretical rationale suggests it should. The purpose of this paper is to use these final-offer experiences, supplemented with experimental bargaining and impasse resolution research, to see how more effective final-offer procedures might be designed.