The increased number of organized employees and amount of collective bargaining in the public sector has caused many industrial relations students to pay attention to the compulsory arbitration mechanism. Some of these have criticized the compulsory arbitration on the grounds that it tends to replace collective bargain ing itself. They argue that each party lacks the incentive to concede and compromise that is so necessary in reaching agreements as long as the threat and/or use of strike is unavailable to them. On the other hand, the proponents of the compulsory arbitration maintain that compulsory arbitration carries out a strike like function by imposing the cost of disagreement. This paper is primarily concerned with these contradictory issues. More particularly, an attempt is made to analyze the impact of the compulsory arbitration mechanism upon the collective bargaining process by developing a bargaining model with explicit considerations of the determinants of the concession behavior of each party as a function of the cost of disagreement and the risk willingness relationship between the parties. The analysis in this paper leads to a synthesis of the above competing arguments, and shows that those contradictory views on the effect of the compulsory arbitration are mainly due to their failure to con sider the concession process.