UA Walton College Economics Faculty Receive NSF Grant to Study Arbitration In Japan

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FAYETTEVILLE, Ark. — Today, more and more business disputes are being resolved by arbitration in the face of costly litigation. Two economics researchers in the Sam M. Walton College of Business, University of Arkansas, have received an additional $12,666 to a $96,112 grant from the National Science Foundation (NSF) to study how cultural differences influence bargaining behavior in arbitration.

In April 2004, Cary Deck, assistant professor of economics, and Amy Farmer, professor of economics, received the NSF grant to study the behavioral and theoretical impact of multiple arbitration formats. The new grant will add an international scope to the original study.

The additional grant was made through the NSF East Asia and Pacific Program, and Deck and Farmer will conduct this research in Japan. They will examine how the cultural differences affect decisions regarding the choice of an optimal mechanism for resolving disputes.

 “The current legal climate is such that many disputes are solved using arbitration rather than traditional litigation. However, there is a need to better understand how these dispute resolution mechanisms are used in the real business world. Given the ever-increasing globalization of our economy, it is clear that international labor negotiations are a critical part of conducting international business,” said Deck.

Farmer said, “No one has previously conducted research on this. Ultimately policymakers, consumers and businesses need to understand not only the theoretical parts of arbitration, but also how your own culture and the culture of your counterpart can affect the outcome.”

Labor disputes are the most common type of dispute resolved by arbitration. In fact, the Supreme Court ruled in 2002 that employers can force employees to use arbitration rather than litigation. Deck and Farmer have been studying how the amount of information each party — as well as the arbitrator — has in the arbitration process hastens or impedes the settlement and, as well, affects the outcome.”

Deck added: “Arbitration is being used in other areas, in addition to labor disputes, with increasing frequency. Basically, it is faster and costs a lot less than going through the courts. Today, arbitration is being used by a lot of corporations.”