“What economists call game theory psychologists call the theory of social situations, which is an accurate description of what game theory is about. Although game theory is relevant to parlor games such as poker or bridge, most research in game theory focuses on how groups of people interact.”
GAME THEORY AND THE LAW (ALTERNATIVE DISPUTE RESOLUTION – MEDIATION)
Game theory, a mathematical model is used in a variety of disputes. The context starts with the premise that the participants, while not knowing fully the position of the other party, are rational and want to achieve the best possible outcomes.
Key points
The definitions above focus on the interactive component between the parties. At the heart, there are the twin issues of conflict and cooperation. There is the assumption that decision-makers are rational and have specific objectives in mind, which is to reach a settlement.
Despite the intensity of a legal dispute, both sides ultimately want to achieve the best possible outcome. Each party has to assume that the other party is rational even though they might not know exactly what the other party wants. It is in this situation that the mediation, negotiator’s role, and the lawyer’s role become increasingly important to help move the parties along in the process of information exchange until they come closer to a common understanding as to what the other person wants.
WHY GAME THEORY?
Game Theory And The Law (Alternative Dispute Resolution – Mediation)
Key points
Game theory provides a new language to think of human behavior and of parties who are in conflict. For instance, negotiation can be used in a comfortable setting to alter the expectations and preferences of the parties. In game theory, one of the dominant models which have been used to explain the behavior of individuals is the Nash Equilibrium. The usefulness of the Nash Equilibrium is that somewhere in the hodgepodge/potboiler of emotions there comes a point where the parties realize that they will need to settle in order to maximize their chance of a positive outcome.
In game theory, the Nash equilibrium explains a solution concept of a non-cooperative game involving two or more players in which each player is assumed to know the equilibrium strategies of the other players, and no player has anything to gain by changing only his or her own strategy. If each player has chosen a strategy and no player can benefit by changing strategies while the other players keep theirs unchanged, then the current set of strategy choices and the corresponding payoffs constitutes a Nash equilibrium. For example, X and Y are in Nash Equilibrium if X is making the best decision she can, taking into account Y’s decision, and Y is making the best decision she can, taking into account X’s decision.
THE DYNAMICS: ALTERNATIVE DISPUTE RESOLUTION – MEDIATION
Key points
It is said that the best lawyers, negotiators, and mediators understand the tension and timing of competition and cooperation in achieving deals that are satisfactory to negotiating parties. Game Theory is fundamental to understanding negotiations. Every human interaction can be understood as a game theory dimension and dynamic in which there is both cooperation in creating value and competition to divide it up. Thus, combining these two aspects into one unified behavior, “cooperation” expresses the strategy of effective negotiations. (Source 4). In his recent book on legal negotiations, Harvard Professor Robert Mnookin argues that lawyers who make deals and resolve disputes are at the same time creating values and claiming value for their client(s). (Source 5)
We will now look at the techniques involved while applying game theory during an ADR – Mediation legal process.
A key concept in ADR – Mediation and strategic negotiations is to develop a plan that not only includes a thorough understanding of your side, but also an understanding of the opponent’s position as well. Effective negotiators and lawyers put themselves in the shoes of their opponents and try to evaluate the strengths and weaknesses of the case as viewed from the other side. When a negotiator and lawyer understand their opponent’s perspective, they are better able to anticipate what will be needed at the right moment to address and overcome the objections of their opponent.
