by Andrew Flake
In a well-known psychology experiment, each member of a group receives some amount of money, say $100, that they can keep on the following condition: They must offer some amount, from $1 to $100, to a partner, and the partner receiving the offer must say “yes.” If the partner rejects the offered amount, no one gets anything. Zero. Economics, looking at what the “rational actor” would do, says that the holder of the $100 should offer $1, and that the recipient, who is getting what amounts to free money, should accept.
That’s not what happens at all. There are all sorts of variants of this ultimatum game, with the makeup of the group differing, and with different amounts offered, but the result is consistent: offers at or better than a 50% split are accepted, and most offers below 30% or so are rejected. The closer splits are viewed as “fair” and the less favorable ones are “unfair.”
As human beings, we seem to be hardwired to make these assessments, even though they are often relative (“fair” measured against what?) and not necessarily in our best interest (as the ultimatum game reveals). But when you are negotiating, you have to be attuned to the impact of “fairness,” including the ways in which it can sometimes be used as a tactic. Party A will communicate that she is just looking to get a “fair” result, or, puzzled at Party B’s supposed intransigence, will characterize her pending offer as more that “fair.”
And indeed, all of us tend to view our approach as more “fair” than average. Observing this tendency to rate ourselves higher than others on the scale of virtues like fairness scale, the psychologist Robert Wright writes that “[t]his is an especially important piece of self-flattery, because it helps fuel the self-righteousness that starts and sustains conflicts, ranging from quarrels to wars.”
The problem is that a comment from Party A about her own or her offer’s “fairness” often carries with it the unspoken criticism that Party B is acting unfairly. In mediation, hearing similar comments and being aware of the reaction they elicit, I will often move the discussion from abstract statements of fairness to objective measures tied to the case and relationship: factors like company valuation, earnings, or the range of non-negotiated outcomes.
It is also helpful to make clear to the counterparty that you are also interested in a fair outcome, and to invite him or her to let you know if something strikes them as unfair. That provides an opportunity to reset, clarify, and define expectations more clearly.
As a mediator, I find it is also possible to work with parties on reframing or shifting perspective: in the litigation world, it is so much likely that a party receiving settlement funds is being given a real and tangible result and benefit, and not losing the perceived homerun verdict. And the reverse is true for a party-defendant who, by focusing solely on one “zero verdict” or summary judgment, has not realized that the offer in front of him avoids substantial and quantifiable potential loss.
So think through the notion of “fairness” in your settlement and mediation discussions. Be attuned to how it is employed, not only by the other party in mediation, but also by you and your client. And rather than general statements about “fairness,” consider how the constructive use of external measurements, reframing, and objectively valuing other outcomes can encourage settlement. Your mediator can provide invaluable assistance in this kind of analysis.
As a side note, when I tried the ultimatum game with my teenagers this morning, giving my daughter ten dollars to split with her brother, she just gave him the whole amount…because “he gave me one of his hoodies yesterday.” Her brother’s tongue-in-cheek comments was “Wow, thank you. I would have offered you 3 cents.”
I admit, when she gave him the whole amount, I felt a little deflated at losing my big drive-to-school teaching moment. But it does illustrate how an ongoing relationship affects cooperation — another non-economic aspect of negotiation and dealmaking, and a blog topic for another day. Be well! ABF