Final answer:
Final offer arbitration restores the incentive to compromise because each party submits their best and final offer for the arbitrator to choose, inducing them to be reasonable to avoid losing out.
Step-by-step explanation:
'Final offer arbitration' (FOA) works by having each party involved in a dispute submit their best and final offer to the arbitrator.
The role of the arbitrator is not to propose a compromise or suggest a new solution, but rather to select one of the offers as the binding resolution. This approach is aligned with option (a): Each party submits a final offer, and the arbitrator selects one.
The reason why FOA restores the incentive to compromise is that each party knows that the arbitrator will choose one of the final offers, which encourages them to submit a reasonable and fair proposal to avoid the risk of the arbitrator selecting the other party's offer.
In the context of political bargaining and negotiations, similar concepts apply. If one party is aware that unfair offers may lead to an unfavorable outcome from the arbitrator or in subsequent negotiations, they are more inclined to make offers that are closer to a fair and equitable split.
Additionally, when parties have had dealings in the past or the negotiations are face-to-face, there is a greater chance of fair offers being made, as compared to negotiations between strangers or those conducted remotely.
Compromise is more likely when the parties involved generally agree on the overall goals but differ on the specifics.
For instance, in international efforts to address climate change, if countries agree on the necessity to reduce greenhouse gas emissions but disagree on the extent, they might be motivated to find a middle ground, as in the example where countries agree to reduce emissions by a median figure that reflects a partial achievement of both parties' goals.