Arbitration in which two sides set out their proposals and the arbitrator is required to choose between them. The parties could be trade unions and employers, or firms involved in a commercial dispute. Frequently arbitrators work by splitting the difference between the parties’ claims, so that it pays each party to make exaggerated demands. Pendulum arbitration is designed to avoid this problem by giving each party an incentive to make proposals which the arbitrator will regard as more fair and reasonable than the other side’s suggestions.