Idea in Brief
The Problem
The two sides in an adversarial negotiation rarely bring their most reasonable offers to the table. Rather, each stakes out a position to its advantage and seeks to give up as little as possible. This common approach is often costly to all involved.
The Solution
A new negotiation strategy can efficiently lead to an equitable agreement: One side presents an objectively fair offer, challenging the other to make its own best offer and then allow an arbitrator to decide which of the two is more reasonable.
The Result
The threat of losing in a final-offer arbitration will typically bring an unreasonable adversary back to the table with a more reasonable offer. The insurance giant AIG tested this strategy in an injury claims case, leading to a rapid, fair settlement.
1. When negotiating, do you want the other side to be reasonable?
2. Is it a good idea to be reasonable in negotiations?
Everyone we ask says yes to the first question, but answers diverge in response to the second. Academics lean toward yes, but businesspeople and lawyers often hesitate. In legal disputes, contested insurance claims, and similarly adversarial negotiations, they point out, the other party is likely to open with an inflated claim or a lowball offer. If the other side’s position is unreasonable, these practitioners suggest, it makes little sense to be reasonable yourself.
