Private Selection and Arbitration Neutrality

Abstract

This paper examines the effects that the private selection of arbitrators have over arbitrators' incentives in deciding the cases before them over the arbitrators' implied bias. These effects have important implications for the design of Arbitration rules by Arbitration and Dispute Resolution providers as well as by other organizations that rely on arbitration for the resolution of disputes among their members. We show that private selection of arbitrators might adversely affect the accuracy of arbitrators' decisions because arbitrators might want to make an incorrect decision when a correct decision would carry the inference that they are biased. We compare the accuracy of arbitrators' decisions under different arbitrator selection procedures.