That "Arena106.exe" file is a self-extracting RAR archive that you must run in Windows, it will extract the game files. Then you have to run "install.exe" once from DOSBox. But until you extract "install.exe" and the rest of the files from the archive you won't be able to do anything, and the archive's self-extractor is for Windows.
You can just follow the instructions in the PDF accompanying the download from
http://www.elderscrolls.com/arena/, although it advises to install the game at "C:\arena" and "mount c c:\", and that's never very advisable. It claims that you can run install.exe from the Windows command line, but run it from DOSBox too for good measure; I'm pretty sure it would be necessary at least if you had Windows x64.