An Analysis of Dual-Issue Final-Offer Arbitration

TL;DR

This paper models dual-issue final-offer arbitration as a zero-sum game, deriving a unique pure strategy equilibrium under reasonable assumptions.

Contribution

It provides the first analytical derivation of a pure strategy equilibrium in dual-issue arbitration modeled as a zero-sum game.

Findings

Derived a pure strategy equilibrium for the game

Proved the equilibrium is both local and unique globally

Offers insights into strategic decision-making in arbitration

Abstract

We discuss final-offer arbitration where two quantitative issues are in dispute and model it as a zero-sum game. Under reasonable assumptions we both derive a pure strategy pair and show that it is both a local equilibrium and furthermore that it is the unique global equilibrium.