Final Offer Arbitration: A Critical Examination of the Theory

Abstract

This paper examines the theory behind Final Offer Arbitration and argues that support in theory for the concept implies acceptance of three assertions— that collective bargaining is necessarily superior to arbitration; that arbitration, if available, will have a "narcotic effect" on the parties and finally that the benefits from an increase in collective bargaining outweigh the cost of less acceptable awards. The study submits that the first assertion has no logical basis but is simply given wide acceptance; the second, examined in the light of New Zealand arbitration data, has no general truth, while the final assertion presupposes the first and likewise has no logical basis.