Biased Judgments of Fairness in Bargaining

Abstract

When court trials (or arbitration) are the
\nmechanisms for resolving bargaining impasses,
\nthe costs and risks associated with
\nthird-party intervention should motivate
\nsettlement (Henry Farber and Harry Katz,
\n1979). However, empirical evidence suggests
\nthat impasses and inefficient settlements are
\ncommon in the legal system and in contract
\nnegotiations. For example, one study of asbestos
\nsuits found that only 37 cents of every dollar
\nspent by both sides end up in the plaintiffs'
\nhands (James Kakalik et al., 1983).