The Expected Utility of Arbitration to Settle a Dispute Depends

question 74

Multiple Choice

The expected utility of arbitration to settle a dispute depends on the:

• A) institution of third-party intervention.
• B) perceived threat presented by arbitration to both sides.
• C) outcomes of past arbitrations between the contending parties.
• D) willingness of the arbitrator to concede to a win-win settlement.

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Definitions:

Risk Aversion

A preference for certainty over uncertainty, where an individual prefers outcomes with lower risk and potentially lower returns.

Expected Winnings

The average amount one can expect to win or lose from a gamble or game, calculated by multiplying each possible outcome by its probability and summing the results.

Hyperbolic Discounting

A cognitive bias where people tend to prefer smaller, immediate rewards over larger, delayed rewards, affecting decision-making.

Exponential Discounting

A process or model that describes how future benefits or costs are valued less as they are further in the future.