Multi-Party Dispute Resolution, Democracy and Decision-Making

Volume II

Carrie Menkel-Meadow, Carrie Menkel-Meadow

• Éditeur: Routledge
• Année: 2017
• ISBN:
  9781351916516
• Édition: 1
• Sujet: Law
• Sous-sujet: Civil Procedure

The articles selected for this volume draw on game theory, political science, psychology, sociology and anthropology to consider how the process of dispute resolution is altered, challenged and made more complex by the presence of multiple parties and/or multiple issues. The volume explores issues of coalition formation, defection, collaboration, commitments, voting practices, and joint decision making in settings of increasing human complexity. Also included are examples of concrete uses of deliberative democracy processes taken from new applications of complex dispute resolution theory and practice. The selected essays represent the latest theoretical advances and challenges in the field and demonstrate attempts to use dispute resolution theory in a wide variety of settings such as political decision making and policy formation; regulatory matters; environmental disputes; healthcare; community disputes; constitutional formation; and in many other controversial issues in the polity.

Part I

Foundational Issues in Multi-Party Dispute Resolution: How is it Different?

[1]

Strategic Barriers to Dispute Resolution: A Comparison of Bilateral and Multilateral Negotiations

by
ROBERT H. MNOOKIN*

* I would like to gratefully acknowledge the valuable research assistance of Karen Tenenbaum and Lucasz Rozdeiczer.

This paper compares strategic barriers to the resolution of conflict – those that may arise because rational self-interested actors try to maximize individual returns – in two party and multi-party negotiations. It suggests that the Pareto-criterion may not provide an appropriate standard to evaluate efficiency in multiparty bargaining because a requirement of unanimity may create potential holdout problems that pose severe strategic barriers. While a variety of procedural rules may permit decision-making without unanimity, the paper briefly explores the application of an unusual procedural rule – the “sufficient consensus” standard – that was employed in the multiparty “constitutional” negotiations in South Africa and in Northern Ireland. (JEL: C 7, C 70)

1 Introduction

Why do negotiations so often fail even when there are possible resolutions that would better serve disputants better than protracted struggle? And why, when resolutions are achieved, are they so often sub-optimal for the parties, or are achieved only after heavy and avoidable costs? These questions have intrigued me for a number of years. Several years ago I wrote an article on “Why Negotiations Fail: An Exploration of Barriers to the Resolution of Conflict” (MNOOKIN [1993]) and later, with the help of colleagues at the Stanford Center on Conflict Negotiation, I wrote the introduction of and edited a volume Barriers to Conflict Resolutions (ARROW et al. [1999]). This work on barriers explored from a variety of disciplinary perspectives the strategic, psychological and institutional barriers that often led to bargaining failures.

I have taken the opportunity of preparing a paper for this conference to begin to think through and compare the barriers to the negotiated resolution of conflict in bilateral and multilateral negotiations. For this initial foray, I will primarily focus on what I have previously called strategic barriers – those, which arise from the efforts of “rational” bargainers to maximize individual returns, may preclude the achievement of the greatest possible “gains in trade” at the lowest cost. In other words, strategic barriers are those that can cause rational-self-interested disputants to act in a manner that proves to be both individually and collectively disadvantageous.

I enter the multiparty world of strategic interaction with some trepidation. For one thing, the most conspicuous body of relevant theoretical scholarship is game theory, which explores issues of strategic interaction between rational self-interested actors. While suggestive, it is also limiting. The axiomatic approach of game theoretical work on “n-person games” is mathematically daunting, has restricted descriptive power, and makes no claims at offering powerful prescriptive advice for negotiators (KREPS [1990]). Indeed, as Anatole Rapoport pointed out nearly 30 years ago, game theoretical analysis of “n-person” games “directs its main thrust” to games in characteristic function form which operates at a level of abstraction that does not consider the strategies available to the players (RAPOPORT [1970, pp. 66f.]).

Nor is there very much theoretical work outside of game theory to build on. Indeed, in 1994, William Zartman claimed, “currently no conceptual work addresses the vast area of multi-lateral negotiations. … Implicitly or explicitly all negotiations theory addresses bi-lateral negotiations, but the complexity of multilateral negotiations remains untreated” (ZARTMAN [1994, p. xi]). Zartman’s claim strikes me as an exaggeration. In fact my own thinking in these matters has been substantially promoted by the important work of Howard Raiffa and James Sebenius. Twenty years ago, in his seminal book The Art and Science of Negotiation Howard Raiffa warned, “there is a vast difference between conflicts involving two disputants and those involving more than two disputants” (RAIFFA [1982, p. 11]). And even Sebenius, who has in my view made the most important contributions to our knowledge of multiparty negotiation, acknowledges that “the clearest and most powerful advances in theory have been within or mainly inspired by the bi-lateral or two-party case” (LAX AND SEBENIUS [1991, p. 153]).

Finally, while much of my own scholarship has been centrally concerned with negotiations and dispute resolution, nearly all of it has focused on two-party cases. Early in my academic career I became interested in how the formal legal system acts as a backdrop for out-of-court negotiations – what I called “bargaining in the shadow of the law.” The context in which I explored this issue was divorce, which involves bargaining between two spouses who may be represented by lawyers (MNOOKIN AND KORNHAUSER [1979]). Some years later I wrote together with Eleanor Maccoby (a distinguished developmental psychologist) a book about how divorcing parents resolved custody issues. Dividing the Child is a longitudinal, empirical study that explored how some 1100 divorcing families resolved custody issues (MACCOBY AND MNOOKIN [1992]). Once again the focus was bilateral negotiations. Similarly, my work on barriers was primarily addressed, implicitly if not explicitly, as on bilateral negotiations.

My most recent book was aimed at helping lawyers and their clients negotiate both deals and disputes more effectively (MNOOKIN et al. [2000]). With the exception of one chapter dealing with multiparty legal disputes, this book primarily analyses legal negotiations in which two individual clients each hire an attorney, there by creating a four-person system with lawyers in the middle. This four-person structure allows the analysis to be “simple and clear,” but our book acknowledged that “reality is rarely so kind” and that many legal disputes and deals involve not two parties, but several; consider bankruptcy proceedings, environmental disputes, or many torts cases in which a single plaintiff may sue several defendants, or there may be multiple plaintiffs bringing suit claiming that some product is defective (MNOOKIN et al. [2000, p. 295]).

The paper is organized as follows. Drawing on my previous work, Section 2 analyzes strategic barriers in the context of the two party negotiations. I begin with the case of a buyer and seller simply negotiating over price – distributive bargaining. I next turn to multi-issue two-person bargaining situations where there are value-creating possibilities. Section 3 represents an initial foray into the multiparty world. I suggest that the Pareto-criterion may not provide an appropriate standard to evaluate issues of efficiency in multiparty bargaining. In a two party case, any negotiated deal presumably better serves the parties than the status quo. The same could be said in a multiparty negotiation only if the consent of every party were necessary. A requirement of unanimity in multilateral negotiation, however, creates potential holdout problems that may pose severe strategic barriers to resolution. This problem can be mitigated if the consent of less than all the parties can permit action. But other problems may arise. If coalitions of less than all are able to change the status quo, this necessarily means that a party left out of a coalition may potentially be made worse off.

A variety of procedural rules may permit decision-making without unanimity in multiparty negotiations. Majority voting is but one of many possible mechanisms to allocate decision-making authority. The outcome of any multilateral negotiation can be profoundly affected by these procedural rules and various decisions concerning agenda. Section 4 briefly explores the application of an unusual procedural rule – the “sufficient consensus” standard – that was employed in the multiparty “constitutional” negotiations in South Africa and in Northern Ireland.

2 Strategic Barriers in Two-Party Negotiations

Beyond Winning suggests that negotiation requires the management of three tensions inherent in negotiation: the tension between creating and distributing value; the tension between empathy and assertiveness; and the tension between principals and agents. In two-party negotiations, the primary strategic barrier relates to the first tension between the desire for distributive gain – getting a bigger slice of the pie – and the opportunity for joint gains – finding ways to make the pie bigger. Understanding this tension – which also exists in multilateral negotiations – is a necessary foundation for all that follows. I begin with the case where there are no value creating opportunities at all – a case of purely distributive bargaining between two parties negotiating over a fixed pie. I then move on to two-party negotiations involving multiple issues where there are value-creating opportunities.

2.1 Distributive Bargaining: Two Parties, One Issue

Our analysis of strategic barriers begins with a bi-lateral negotiation that essentially involves distributing value. Assume two individuals – Buyer and Seller – must negotiate the price of a used automobile. To simplify the matter, let us assume these parties are concerned about only this deal, and that there are no linkages to similar problems or issues of repetitive play.

Negotiation analysis suggests that each party needs to determine his BATNA – Best Alternative To a Negotiated Agreement.¹ The BATNA indicates what that negotiator can do away from the table if no deal is reached. The BATNA must be translated into a reservation value – the amount at which the bargainer is indifferent between reaching a deal and walking away to his BATNA.

In our example, I will assume that Seller’s BATNA is to sell his car to a dealer, which has offered him $7,000. I will assume that this is Seller’s reservation value as well. Let us assume that the Buyer’s BATNA is to buy a somewhat newer, used car from a dealer with slightly lower mileage for $11,500. Buyer translates this into a reservation value of $9,000 for the car the Seller is offering.

On these facts the Zone Of Possible Agreement (ZOPA) - the bargaining range created by the two reservation values – lies between $7,000 and $9,000. At stake in this negotiation is how the surplus of $2,000 will be divided. Both the Buyer and the Seller are made better off by any transaction with a price anywhere in the bargaining range. Indeed, any deal within the ZOPA is Pareto-superior to no deal at all. While a sale for any price between $7,000 and $9,000 is Pareto-efficient, and other things being equal, the Buyer would obviously prefer to pay less and the Seller would prefer to receive more. Note that this is not a zero-sum game, because both players would prefer to negotiate a deal within the ZOPA than to have no deal at all. “[W]hen bargaining, buyer and seller may have divergent interests with respect to price, but both may prefer to reach some agreement” (DAVIS [1983, p. 45]).

The desire for distributive gain may lead to a bargaining failure in which the parties do not reach a deal, notwithstanding the ZOPA, because each is seeking to maximize his own return. Two factors help explain this possibility: information asymmetries and strategic behavior.

In most negotiations, each party has at least some material information that the other party does not have. One potential information asymmetry is the condition or the quality of the goods to be traded. The Seller typically knows far more about the quality of what is being sold than the buyer. It is well established that information asymmetries about quality, the “lemons problem,” can also lead to non-Pareto outcomes (AKERLOF [1970]).

The still more common asymmetry concerns reservations values. Buyers and sellers usually do not know each other’s “bottom line.” Buyer, for example, may know neither the amount a dealer would pay for the car, nor how eager the Seller is to get rid of it. Seller may not know Buyer’s alternatives or how badly Buyer wants this particular car. Negotiators rarely reveal honestly their reservation value. Information asymmetries of this sort open opportunities for strategic opportunism. Indeed the essence of distributive bargaining involves the attempt on the part of negotiators to shape each other’s perceptions of what is possible. When deciding what action to take, each player must consider the other’s possible reaction, and vice versa. This is the essence of strategic interdependence. Each negotiator is constantly assessing what the other side might eventually be willing to do – how far they may go.

Negotiators may employ a variety of tactics to influence the other side’s perceptions of what is possible – some misleading, some outright dishonest. As a consequence, the parties may never discover that there is a ZOPA because, aspiring to drive a hard bargain, each may make extreme offers from which they recede very slowly. Neither negotiator typically knows how far it might be possible to push the other side. As a consequence, the drive for distributive advantage may at times be a barrier to a deal being made or a dispute being settled. And even if a sale is consummated (or the lawsuit settled), the transaction costs of reaching agreement may be much higher than necessary.

What if Buyer and Seller somehow know each other’s reservation value? In this case, an obvious focal point for a deal would be to divide the surplus i...