This paper proposes a new arbitration rule, double-offer arbitration (DOA), which aims to improve final-offer arbitration (FOA), a well-known method to settle a dispute between two disputants. Under DOA, each disputant makes double offers, primary and secondary, for settlement. If the offers of two disputants do not converge, the arbitrator evaluates the two double offers by a criterion function, then adopts the primary offer of the disputant with a better criterion value. In the literature, it has been shown that under some conditions, a Nash equilibrium exists under FOA in which the offers diverge. However, we show that, under similar conditions, there is also a Nash equilibrium under DOA, in which the secondary offers of two disputants converge. Therefore, the arbitrator's presence in the arbitration process is necessary, but not his/her actual choice.
- Double-offer arbitration (DOA)
- Final-offer arbitration (FOA)
- Nash equilibrium