This paper presents an application of the analytic hierarchy process (AHP) in modeling final-offer arbitration (FOA). The process is a decision-making tool used in complex multi-attribute decision problems and can be used to model complex arbitration cases in a relatively straightforward manner. The arbitration model used in this paper consists of an issue-by-issue decision process, where the arbitrator selects from among the three alternatives: the union’s offer, management’s offer, and the factfinder’s recommendation. The process involves three levels of hierarchy or criteria for decision making. The hierarchies are: the offers and recommendation, the arbitration criteria, and the arbitrator’s award on an issue. The arbitrator is required to select from the three alternatives based on five attributes—inflation, ability to pay, local wage rate, average collective bargaining increases, and present wage rate. This FOA problem is solved using AHP, and the results are presented. Implications for the application of AHP in FOA are discussed.

Thomas Saaty first proposed the analytic hierarchy process (AHP) in 1972 [1]. AHP is a problem-solving methodology that is useful for complex, multicriteria decisions comprised of quantifiable as well as intangible factors. It is very effective in providing a logical structure to complex problems by decomposing a