Legal Negotiation

Negotiation is extremely common in legal settings. In the criminal context, most cases are resolved through the plea bargaining process rather than through trials. Similarly, many more civil disputes are resolved by private settlement than go to trial. Transactional lawyers spend much of their time negotiating deals and contracts. In practice, lawyers will negotiate with opposing parties and their counsel, with insurers, with regulators, and with their own clients. Psychologists have studied negotiation in a variety of contexts, including negotiation as it occurs in the legal system. Research indicates that negotiation outcomes may be influenced by such factors as cognitive heuristics and biases, social perceptions, emotions, social influence, and the legal background of the negotiators.

Basic negotiation theory holds that negotiation outcomes are a function of the negotiator’s reservation price, or bottom line. That is, negotiators will identify a point at which they would prefer to walk away from the negotiation without an agreement rather than accept terms that fall below that point. Where negotiators set this reservation price along a continuum of possible agreements is affected by their expectations about the outcomes that would likely result in the absence of a negotiated agreement. So, for example, a civil plaintiff’s reservation point (i.e., the lowest amount for which he or she would settle) is informed by his or her prediction about what would happen if the case was decided at trial. Similarly, a party negotiating a sales agreement on behalf of a buyer sets his or her reservation price (e.g., the highest price he or she would pay) in light of the availability and value of a possible agreement with an alternative contracting partner. Negotiators with more attractive predicted alternatives are likely to have higher reservation prices and to reach more favorable agree-ments. Negotiators have also been shown to be influenced by their aspirations, or goals, for the negotiation, with negotiators who set higher goals achieving more favorable agreements. At the same time, however, high reservation prices and aspirations have both been shown to lead to a higher likelihood of impasse (i.e., failure to reach a negotiated agreement) and to a decreased level of satisfaction with the same objective outcomes.

Within this general framework, however, it is clear that negotiators are influenced by a number of additional factors. Going beyond expected value theory, in which negotiation decisions are determined by a comparison of the expected value of forgoing a negotiated agreement with the expected value of the proposed agreement, psychological research demonstrates that negotiation decision making is also affected by negotiators’ construal of and judgments about the other party or parties, the context, and themselves.

Heuristics and Biases in Legal Negotiation

Legal negotiators, like other negotiators, can be influenced in their decision making by psychological heuristics or biases. For instance, legal negotiators on different sides of a dispute tend to make biased evaluations of the merits of the case such that their evaluations favor their side, overestimate their likelihood of prevailing at trial, and are more likely to believe that the fair outcome is one that favors their side. In part, this is because those who are exposed to only the information that is available to a particular side of a dispute tend to be optimistically overconfident—that is, to be more confident and less accurate in their pre-dictions of the likelihood that they will prevail than those who have information from both sides. Similarly, when they seek out additional information, negotiators exhibit the confirmatory bias as they seek and evaluate data in ways that are consistent with their already existing views. In addition, however, even when they have access to the same objective facts, negotiators often interpret those facts and make judgments about them in ways that are consistent with their own (or their clients’) interests—a manifestation of the self-serving (or egocentric) bias.

Negotiators may also be influenced by anchors. Anchoring and adjustment refer to a phenomenon by which available values provide a starting point (or “anchor”) for a judgment; adjustments are then made away from the anchor, but these adjustments are often insufficient. In the legal context, anchors have been shown to influence settlement decision making in civil cases by anchoring negotiators’ evaluation of the appropriate settlement amount. For example, the availability in memory of sizable verdicts that are reported in the media may anchor negotiators’ perceptions of a case’s potential settlement value. In addition, the first offer made in a settlement negotiation has been shown to influence the final negotiated agreement—the higher the opening offer, the higher the ultimate settlement. Similarly, research has found that disputants are more likely to agree to a particular final settlement amount when that final offer is preceded by a more extreme opening offer than they are when the offer is preceded by an opening offer that is only slightly different from the final offer. Because the initial offer anchors expectations about the appropriate settlement amount, the value of any concession is measured against those expectations.

In addition, experimental research has demonstrated that negotiators can be influenced by contrast and compromise effects as they generate and consider options for negotiated outcomes. Contrast effects occur when the options in an initial set are evaluated differently relative to each other when an additional option is added that is similar, but inferior to one of the initial options, making that initial option appear relatively more attractive. For example, a disputant involved in a dispute over a piece of property might consider selling the property and dividing the proceeds with the other party or allowing the other party to keep the property in exchange for a particular sum of money. When a third option is introduced, for example, allowing the other party to keep the property in exchange for the same sum of money, but paid over time—an option that is similar but inferior to the option involving a lump sum payment, more people are inclined to choose the lump sum payment option and fewer are inclined to sell the property and divide the proceeds than in the absence of the additional option.

Compromise effects, on the other hand, occur when an extreme option is introduced into the set of options under consideration. The introduction of an extreme value alters the range of options that are in the middle of the choice set. Because negotiators are more likely to choose an option when it appears to be a moderate choice, this shift in range tends to increase the attractiveness of a choice that would have appeared extreme in the smaller set, but appears moderate in the presence of the additional, more extreme, option. For example, negotiators are more likely to enter into a land purchase contract when the property at issue is considered among a set of alternative properties that make it appear to be a compromise, or moderate, option. Thus, while it is useful for legal negotiators to actively generate creative options for agreement, it is also useful for them to attend to the ways in which additional options affect their evaluation of existing alternatives.

Finally, legal negotiators are also influenced by how the negotiation is framed. Prospect theory suggests that negotiators compare proposed outcomes with the status quo. When the negotiator’s choices are perceived as gains, the negotiator is likely to behave in a manner that is risk averse—thus, civil plaintiffs in ordinary litigation may be more inclined to settle. In contrast, when the negotiator’s choices are perceived as losses, the negotiator is likely to behave in a risk-seeking manner—thus, typical civil defendants may be more inclined to gamble on a trial.

Social Factors in Legal Negotiation

Negotiations in legal settings are also influenced by a variety of social and interactional factors. For example, legal negotiation is influenced by the negotiators’ perceptions of fairness. Negotiators are concerned both with the distributive fairness of a negotiated outcome and with the procedural and interactional fairness of the negotiation process itself. Importantly, negotiators resist agreeing to substantive outcomes that do not comport with their notions of substantive fairness. Similarly, fair interpersonal treatment has been shown to diminish self-serving bias, reduce the likelihood of impasse, and increase satisfaction with substantive outcomes.

Social factors can also influence the perceived fairness of a proposed settlement. For example, options that are otherwise perceived to be fair seem less so when proposed by the other side in the negotiation—a phenomenon known as reactive devaluation. Similarly, the negotiators on each side tend to value the concessions that they make (and thus are perceived as losses) more highly than they value those concessions that are made by the other side (and thus are perceived as gains). This “concession aversion” consequently influences perceptions of the relative fairness of reciprocal concessions and of proposals offered by the parties.

In some instances, legal negotiators may also be influenced by a need to restore or maintain a sense of equity between the parties or to achieve vindication. Thus, they may reject compromises that seem inequitable, even when accepting them would be economically rational. Negotiators may also seek out ways to achieve a sense of equity or the acknowledgment of a harm. Thus, for example, apologies have been shown to influence legal settlement decision making. Research has shown that when a wrongdoer apologizes (particularly if the apology accepts responsibility for having caused harm), the injured party may make more favorable attributions about the opposing party and the incident, be less likely to seek legal counsel for assistance in pursuing a claim, set lower aspirations, find lower settlement values to be fair, be less likely to desire punishment, and be more likely to accept an offer of settlement than when the wrongdoer does not apologize.

Legal Negotiation Influence

Scholars of legal negotiation have also drawn on the psychology of influence and persuasion to better inform their understanding of negotiation strategies. In particular, legal negotiators may adhere to principles of reciprocity when engaging in the back-and-forth concession making that characterizes most negotiation. The norm of reciprocity holds that when one negotiator makes a concession to the other, the other is obliged to respond in kind. Thus, a legal negotiator may elicit a concession from the other side by offering a concession of his or her own. Moreover, a legal negotiator might make an extreme demand that is likely to be rejected, followed by a more moderate request—the moderation of the request may be perceived as a concession and, thus, may elicit a reciprocal concession. In psychology, this is known as the “rejection-then-retreat” strategy. Legal negotiators may also invoke authority, scarcity, social proof, or familiarity and liking as strategies of social influence in negotiation.

Legal Negotiation and Emotion

Legal disputes can involve intense emotions, such as anger, and such emotions are known to play a central role in negotiation. Negotiators experiencing positive emotions tend to make more concessions and to be more likely to engage in problem-solving behavior. Conversely, negotiators experiencing negative emotion tend to be more likely to use hard-bargaining strategies and less likely to create joint gain.

One specific emotion that has been explored in the legal context is the role of regret in legal negotiation. Research has found that disputants may prefer to reach negotiated settlements in legal cases rather than go to trial, in part due to a desire to minimize the regret they anticipate experiencing following their decision. Disputants who choose to settle are not able to know what the outcome of their case would have been had it gone to trial and are, thus, able to avoid the regret that would attend the knowledge that a trial would have resulted in a better outcome. In contrast, disputants who choose to go to trial will ultimately be aware not only of the outcome of the trial but also of any settlement offers they had rejected. Therefore, it is possible that they will experience the regret of knowing that they could have obtained a better result through settlement—regret they would prefer to avoid.

Agents/Lawyers in Legal Negotiation

One of the distinctive features of much legal negotiation is that the principal parties—the legal clients—are often represented by attorneys as agents. As agents, attorneys are likely to engage in settlement negotiations in ways that differ from those of their clients. For example, as nonparties, attorneys can be more detached from the emotions underlying the dispute. Similarly, attorneys are selected and trained to be highly analytical. Moreover, given their role as legal advisors, attorneys are likely to be more familiar with and attuned to the legal rules than are their clients. These differences give attorneys some advantages in handling legal disputes. For example, attorneys may be able to avoid the impasse that might result when the parties are too emotional to negotiate with each other. However, these differences also present attorneys with some challenges in representing clients in negotiation. For example, attorneys may need to pay special attention to clients’ nonlegal psychological, emotional, and social interests to negotiate effectively on their behalf.

References:

  1. Birke, R., & Fox, C. R. (1999). Psychological principles in negotiating civil settlements. Harvard Negotiation Law Review, 4,
  2. Korobkin, R., & Guthrie, C. (1997). Psychology, economics, and settlement: A new look at the role of the lawyer. Texas Law Review, 76, 77-141.
  3. Loewenstein, G., Issacharoff, S., Camerer, C., & Babcock, L. (1993). Self-serving assessments of fairness and pretrial bargaining. Journal of Legal Studies, 22, 135-159.
  4. Ross, L., & Ward, A. (1995). Psychological barriers to dispute resolution. Advances in Experimental Social Psychology, 27, 255-304.
  5. Schneider, A. K., & Honeyman, C. (Eds.). (2006). The negotiator’s fieldbook: The desk reference for the experienced. Washington, DC: American Bar Association Section of Dispute Resolution.

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