DEFINITION of 'Arbitration'

An informal hearing regarding a dispute. The dispute is judged by a group of people (generally three) who have been selected by an impartial panel. Once a decision has been reached, there is no further appeal process.

BREAKING DOWN 'Arbitration'

We frequently hear this term when professional sports teams are negotiating contracts with their athletes. Typically, one party aims unrealistically high and the other one aims really low, and the settlement occurs somewhere in the middle.

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