Arbitrator Compromise in Final Offer Arbitration: Evidence from Major League Baseball

This article presents evidence that the preferred awards of arbitrators in final‐offer arbitration (FOA) compromise between the perspectives of the bargainers. Using Major League Baseball FOA offers between 1986–2002, this study finds strong evidence that final offers (which are strategically formulated around the preferred award) are a weighted average of the player's salary in the previous season and the average free agent salary. The findings are particularly interesting because FOA was created to eliminate arbitrator compromise.