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Published by: Darren Lawson on Dec 31, 2012
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Columns
Post-Settlement
Settlements
 Ho
ward 
RaWa
c’s
all
very
well
to
talk 
about
colic
-
gial,
joint
problem-solving
negoti
-
ation
processes,
but my
opponent
has
unreasonable
aspirations
and
I’m
not
going to
weaken my
just
claim by
trying to
be
a
nice
guy.
I’m
going
to bargaintough.
for myself,by
myself.”
No
matter how much
we
might
bemoan
this
state
o
a
-
fairs.
we must
recognize
that
a
lot
o
disputes
are settled
by
hard-nosed,positional
bargaining. Settled,
yes.
But efficiently
settled?
Often not.
Bothsides are
often so intent
on
jus
-
tifying their
individual
claims
that
not
much time
is
spent
on
creating
gains
to
be shared.
They quibbleabout sharing
a
small
pie
andoften
fail
to
realize that
perhaps
the
pie
~n
be jointly
enlarged.
Even
where
there
is a
modicum
o
civility
andsome
cooperative
behavior
on
the
part
o
the
negoci~cors,
it
is
nut
easyto
squeeze out
joint gains.Here’s
one suggestion
for how
such
intransigent negotiators
mightbe
helped.
Let
them
negotiate
as
they
will.
Let
them
arrive
at a
settle-merit,
or
let a
judge
or
 jury
impose
a
settlement
on
them.
Mr.
Jones.
one
protagonist,
might
feel
happy
about
the
outcome—he
got
more
than
he
expected—but
Ms.
Spencer, the
other
protagonist.
is
unhappy—she
did not
realize
her
just
aspirations.
But
even
in this
case
the negotiators
might
not
have
squeezed outthe
full
potential
gains.
There
max’
be
another
carefull~’
craftedsettlement
that
both
Jones andSpencer
might
prefer
to
the
settlement they
actu
-ally
achieved.
Now
let~s
imagine
that
along
comes
an
intervenor
from the
Con
-
tract
Embellishment Service,
and
he
asks
Jones
and
Spencer
after
they
have
achieved
their
settlement
if 
they
would
be willing
to
let
him
try
to
sweeten
the
contract
for
each.The
intervenor
carefully explains
to
Jones
chat
he
will
have
the
securityof 
the
outcome
leveL
he
has
already
achieved
but
that
he
(Jones) may
have the
opportunity
to
do
still
bet’
cer~
The intervenor
proposes
that
after
some
analysis he
will
suggestan
alternate
settlement—a
post-set 
-
tiement 
settlement,
if 
you
will—chat
would
replace
the original
settle
-
ment
onlv
on
the condition
that
both
parties
agree
to
thechange;
and
o
course
they
would
only
do
this
if 
each
prefers
the
new
settle’merit
proposal to
the old
one.
Is
this
pie
in
the
sky?
Can
the
in
-
cervenor
deliver
the
goods?
Not
always, but
then
Spencer
andJones
would not
have
lost
anything
in
try
-
ing,
except
perhaps
their
time. But
it
is
mv
contemion
that in
really
corn-
Howard
R,aiffa
i~.
Fr,ink 
Ptumpwn
Ramsey
Profes.sor
o(
Mar.age~ial
Ecut~um~cs
at 
Harvard
Business
School
~ind
the
K~nnc’Jv
School
of
Gove~nme~t.
His
most
rcc~nt
hook
is
Thi..4rr 
an
Sc:e’nc~’ 
c~f
.‘~(-go(:ut:on 
(Cambridge.
Mass.:
Harvard
Universuv
Press.
1914,).
,,_~‘,
i5:~
.
ui~o..
‘iii.ø’~’
Pkn.,m
PoOl,,h,n~
(.jr,a,~.,n
,‘i
lournal 
ia,:uarv 
~
 
plex negotiations
where
a
lot of 
issues
are at stake,
where
uncertain
-
ties
are
involved,
or
where
settle’
merits
could
involve
transactions
and
payments
over
time,
that
more
often
than
not jointly
desirable
post-
settlement settlements
could
beachieved
by
an
analytical
intervenor.
If 
successful,
the
intervenor
wouldadd
a
surplus value
to
each
side,
and
he might be
recompensed
for
his
effort
by
getting
a small
propor
-tional
slice
of 
this
surplus
(if 
there
is
such a
surplus)
from
each
of 
the
pro
-tagonists. So
everybody
would
be
happy.
Lets
suppose
chat
Spencer
is
eager to
cooperate
with
the
inter
-venor
andthat
Jones
also
reluctantly
agrees. but each
side
is
not coo
hap.
pv
about
resuming
face-to-face
ne
-gotiations. The incervenor
proceeds
by
meeting
separately
with
each side
and
doing
a
careful.
deepanalysis
of 
its
interests
and
values,
probing
in
particular
values
that
may
be
quite
sensitive.
Theintervenorpromises
each
side
not to reveal
these
confi
-dentialities
to
the
other
(nor
to
any
-
one
else),
and
his
promise
is
crediblebecause
of 
his
existing
reputation
and
his
desire
to
do
business
o
a
similar
kind with others.
In
the course
o
these separate
meetings.
Jones and
Spencer
mighteach give
the
iritervenor
informa
-tion
chat
was
deliberately
distorted
or
onlypartially
revealed
during
the
original
negotiations.
Also,
the
inter
-
venor might help
crystallize
values
that each
protagonist
might
not
have
c!earl~-
articulated
to
himself 
or
her
-
self.
It
might
be
self-evident
chat
Jones
wants
more
of 
attribute
X
and
less
of 
Y .
and
vice
versa
for
Spencer,
but the
critical
ingredient
might
in
-volve
intricate quantitative
tradeoffs
between differentincommensurable
qualities.
By
theend
of 
these deep-mapping
exercises,
the intervenor
would
be
privy
to
information
that
neither
side
had
about
the
other.
Now the
analytical
task 
is
clear.
Can
the
in
-
tervenor
craft a new
settlement
thateach
party
would prefer
to
the
oldone? Can he
sweetenthe
old
con
-
tract
for Jones and
Spencer
simul
-taneously?
There
may
be more
than
one
new
settlement
chat
would
be
better
for
each
than
the old
one,
and
then
the intervenor would
have
a
choice.
Ocourse,
he
would thenwant
to select a
settlement
that
would
squeezeout
all
potential
jointgains.
Several
choices
might
still
then
remain,
but that
possibility
should
not
detract
from
the
scheme.
How to find
appropriate
candidate
settlements becomes
a
mathematical
optimization
problem, and
a
host
o
techniques
can
be
employed
to
help
the
intervenor
identify
candidates
and
make his
selection.
Let’s
push
on
and
assume
that. on
the
basis
o
the information theintervenor
has
elicited
privately
and
confidentially from each
of 
the
parties,
he
de~igns
a
new
settlement
that he believes
each
party
will
pre
-
fer
to the old
negotiated(or
irn
-
posed)
settlement.
He
then
pro
-poses. in a
cake-it-or-leave-it
way,
the
new
post-settlement settlement.
Either
side
has
veto
power. There’s
no
bargaining.
If 
both
say
yes.
so
be
it.
If 
one
says
no. theold
settlement
prevails. That’s
the
scheme.
If you
were
a
party
to
a
dispute
and
had
already
negotiated
a
settle-
merit or
had
a
settlement
imposed
on
you.
would
you.
on
a
contingent
fee basis.
employ the
services
of 
the
incerverior
from
the
Contract
Em
-
bellishment
Service? Would
you
tell
him
the
truth
about
yourvalue
tradeoffs
and judgments
about
criti
-cal
uncertainties?
10
Howard 
Rasftj P~s:~S~’r:Iemf,tt 
Sv::ternt”us 
 
I
havenever
put this
embellish
-
ment
scheme into
practice,
but
I
do
have
somepromising
laboratory
cvi
-
cjericc.
I
and
a
host
o
others have
shown
that in
two-parts’
negotia
-
tions with
several interacting
issues
to
resolve,
negotiated
settlements
in
Laboratory
settings
usually leave
room
for
potential
additional joint
gins.
Again
in
laboratory
settings.
I
have
asked
many
pairs of 
contend
-
ing
players(after
each
pair has
nego
-
tiated
a
settlement)
whether they
would
be willing to
let
a
thirdparty
try
to
find a
new
settlement
that
would
jointly
be
preferred
to the old
settlement.
Practically
all
subjects
say
something
to the
effect
of,
Wh
not.
I
havenothing
to
lose.”
A
lot
of them
consider how
the~
-
might
distort their
values
andinterests
to
the
incervenor,
but
theythen
realize
that
it
is
not so clear
how
they
should
falsify
information
to
their advanrage.
arid
they
end
up
by
saying
that
they
would
disclose
their
value
tradeoffs
as
truthfully
as
possible.
Let’s
sup~se
that
Mr.
A
discloses
his
interests
to the
inter
-
venor
in
a
distorted
fashion
and
that
theinrervenor
then
succeeds
in
find
-
ing
a
post-settlement
settlement
he
believes
A
should
prefer
to the old
settlementaccording
to the
values
A
has
stated.
If this
post-settlement
settlement
is
in reality worse
for
A
than
the
old
settlement,
then
A
will
reject
the offer.
On theother
hand,
A
might
get
a
better
final
settlement
by
providing theintervenor
with
false
information,
but
as
I
said.
how
to
distort information
to
one’s
ad
-
vantage
is
far
from
clear.
It
is
simply
prudent
to
tell
the
truth.Thus
far
I
have talked about
sug
-
gesting
this
post-settlement
embel
-
lishment
scheme to
the
negotiating
protagonists
after
they
have already
reached
a
settlement.
What
would
happen
to
the
first-stage
negotia
-tions if 
the
partieswere
to
know
ini
-
tially
that
their
settlement
yet~toLbe~
decided
would
be,
or
might be,
sub
-
 ject
to
this
post-settlement
scrutiny?
I
suspect
that
it
would
not
have
much
impact
on the
negotiators
in
really
complicated
negotiations.
in
the
tension that
exists in
negotia
-tions
between
creating
joint value
and
claiming individual
value, this
post-settlement
scheme
might
dis
-tort
the
initial
negotiations
unfortu
-
nately
in
favor
o
the
claiming-value
side.
Certainly,
we
can
concede
thattwo very
analytical
protagonists
inclearly
structured
games
with
clearpayoffs
would
in a
laboratory
settingmodify
their
initial
negotiating
behavior
if 
rhe~’
were
certain
that
theme
would
be
post-settlement
em
-
bellishments.
But
even
in this
ex
-
treme
case, an
astute game theoristwould
be
in a
quandary
about
how
to
behave
if 
information, about
the
preferences
o
theother
protagonist
was
ambiguous,
if 
it
was
not
certain
that
post-settlement
analysis
would
be
forthcoming,
and
if 
it
was
notclear
how
the
interverior would
in
fact
choose
a
post-settlementsettlement from
a
myriad
o
possi
-
bilities.
Indeed.
I
myself 
as
a gametheorist
would
be
tempted
to
forget
about this
potentialsecond-stageembellishment
feature.If 
it
makes
such
good
sense
toengage in
post-settlement
embellish
-
‘m erits,
why
not
call
in this analytical
intervenor right
from
the
start? Why
not
do pre-settlemnent
embellish
-
ments?
Of course this
could
bedone,
and
is
done,
in
the
arbitration
of 
disputes.
But
L et’s
go back toJones
and
Spencer.Jones
feels that
he
has
the real power.
whatever
thatmeans.
and
he
is
not going
to
take
chanceswith
this
outside
inter
-venor. He
might
intuitively
calculatethat
he
could
do
better
against
Spen
-cer in a
rough-and-tumble
bargain-
.‘4~gotwtIonJ()urnaI 
Jan&sar~’
1~85 
11

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