Organizational Learning and the Narcotic Effect

Abstract

Despite arbitration has been widely spread during last three or four decades as a mean to resolve bargaining impasse in the public sector, still some people believe that arbitration is not compatible with genuine collective bargaining due to the narcotic effect. Surprisingly little theoretical attention, however, has been given to the narcotic effect. Based on the bounded rationality and organizational learning theory, the present study identified three potential mechanisms through which the usage of arbitration may increase the probability of its usage in the subsequent negotiation; uncertainty reduction, increased overconfidence, and ambiguity associated with arbitration outcomes. Some testable propositions were also proposed. Dispute settlement procedures can become habit-forming and negotiations become only a ritual (Final Report of the Governor's Committee on Public Employee Relations, 1966, p.33).