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The Appearance of Fairness
When I teach my negotiation class, I tell my students how important it is to leave opponents with the feeling they were treated fairly. To demonstrate this phenomenon, I have my students engage in the Ultimatum Game. I divide the students into pairs and assign $10,000 to each group. I then indicate that one is authorized to suggest any division of the $10,000 they think appropriate. Once they receive the proposed division, their partner can either accept that split - and each person receives the allotted amount - or their partner can reject the proposed split - in which case neither receives anything.
Some individuals suggest a $5000/$5000 division, and this offer is quickly accepted by their respective partners. Others propose a $6000/$4000 split favoring themselves. Most of their partners accept this division, believing that $4000 is better than nothing. Some offer a $7000/$3000 split. Only about half of the offerees accept this proposal. Those who accept their $3000 do so reluctantly, because they feel they have been short-changed. The persons who reject this uneven division indicate that they would rather receive nothing than allow their partner to take such advantage of them. A few suggest an $8000/$2000 division - or even a $9000/$1000 split. These offers are usually rejected, due to their one-sided nature. The few people who accept these proposed divisions rationalize that $2000 or $1000 is still better than nothing, even though they are angry at the unfairness involved.
I then have the partners reverse their roles. Those who were the offerees in the initial interaction become the offerors. They are authorized to propose any division of the $10,000 they think appropriate. Those who were originally offered $5000/$5000 splits by their partners almost always offer similar 50/50 divisions which are quickly accepted. Those who were offered less generous divisions almost always offer their partners similarly unbalanced splits - and many offer their partners less generous amounts. For example, people initially offered $6000/$4000 divisions, respond with $7000/$3000 offers of their own.
When this exercise is finished, we discuss the importance of giving negotiating opponents the sense they are being treated fairly. I tell them that this concept is especially critical when they possess greater bargaining power than their opponents and have the capacity to dictate the final terms to be agreed upon. They should try to provide the other side with sufficient benefits to let them think they are being treated equitably. Less important items should be conceded in return for more important terms, even if they might have been able to retain one or two of the issues being exchanged. If they fail to do this, they may discover that their opponents would rather cause mutual destruction through nonsettlements than give in to agreements they think treat them inequitably.
Individuals should never gloat at the conclusion of bargaining interactions no matter how well they think they have done. Firstly, they may not have done as well as they think they have and they will only embarrass themselves. Secondly, even if they have really cleaned out the other side, they should realize how crucial it is to let the other side feel it was treated fairly. If that party gets "buyer's remorse," it may try to get out of the deal. This can become a costly mistake. Even if the other side honors the one-sided arrangement, they will remember in the future how they were treated now. When the parties meet again, they will be out for revenge. They will be like the students who were initially offered unbalanced divisions of the $10,000, and they will probably respond with their own efforts to get even.
When negotiators represent parties that have on-going relationships, they should always appreciate the appearance of fairness. Parties that take advantage of short-term power imbalances will find their clients adversely affected by future power imbalances favoring the other side. Even if someone is negotiating on behalf of someone unlikely to ever interact with this opponent again, the negotiators should appreciate the fact that they may see the other bargainers again. This is especially true of lawyers who practice in a certain geographical area or business agents who work within a particular industry. They will regularly see the same adversaries in future settings involving different clients. Those advocates who take unfair advantage of these people now will encounter much fiercer opposition in their future dealings than they would if they left those individuals with the sense they were being treated fairly in their current encounters.
Charles B. Craver is the Freda H. Alverson Professor of Law at George Washington University. He is the author of Effective Legal Negotiation and Settlement (5th ed. 2005 Lexis) and The Intelligent Negotiator (2005 Prima/Crown) and coauthor of Alternative Dispute Resolution: The Advocate's Perspective (2nd ed. 2001 Lexis). Over the past thirty years, he has taught negotiation skills to over 75,000 lawyers and business people throughout the United States, and in Canada, Mexico, Puerto Rico, England, Austria, Germany, and the People's Republic of China. He can be reached at firstname.lastname@example.org.
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Copyright © 2006, Charles B. Craver
Copyright © 2006, The Negotiator Magazine