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Six Key Psychological Principles at Play in Mediations

Psychology and mediationIn several of our past blog posts, we’ve referenced various psychological principles applicable in mediations. An awareness of psychological principles can help mediators understand why parties have taken certain positions or why they are behaving in a certain way, as well as anticipate how parties may respond to a mediator’s suggestions.

Readers have asked us to consolidate these psychological principles into a single post and create a glossary of sorts. Below is a list of six key psychological principles that we have previously discussed. Obviously, the list is not exhaustive and we welcome comments from readers highlighting additional concepts that we have not mentioned.

As you review these principles, bear in mind that they do not exist in isolation; all may be operating simultaneously to a greater or lesser degree in a given mediation. Capitalizing on them to drive resolution is more art than science. A skilled mediator will note their presence or absence, and orchestrate negotiations accordingly to bring the mediation to a successful conclusion.

#1: Confirmation Bias 

As defined by the Farnam Street website, confirmation bias is the “tendency to cherry-pick information that confirms our existing beliefs or ideas.” In other words, after making a decision or reaching a conclusion in which we have a vested interest, we tend to interpret new evidence in a manner that validates our choice, while distinguishing or ignoring facts that contradict or undermine it. The upshot is that confirmation bias can cloud our judgment, and lead us to continue pursuing erroneous courses of action in the face of evidence that our position is mistaken.

Research indicates that attorneys are especially prone to confirmation bias. This finding makes sense since attorneys are trained to zealously advocate for their clients’ position. However, while zealous advocacy is commendable, the same research shows that confirmation bias can lead attorneys to overrate strengths and underrate weaknesses in their cases, and as a result, reject reasonable settlement offers they should accept.

How should mediators deal with confirmation bias? When caucusing, a mediator can play devil’s advocate by pointing out the weaknesses in each side’s case, and the strengths of the adversary’s positions. Originating from a neutral without a stake in the outcome, a mediator’s evaluations come across as more credible and thus may persuade parties to rethink their positions.

Because confirmation bias is a strong tendency, however, it is important for mediators to remain patient and not give up prematurely. As mediator Stephen Hochman writes, “unrealistic expectations must be lowered gradually.” Thus, confirmation bias is best combated by breaking down a dispute into components and reaching agreement on a series of small points sequentially.

If unable to fully bridge the gap between two parties committed to certain positions, a mediator might resort to a mediator’s proposal, or propose a “contingent contract” that allows parties to maintain their positions while hedging their bets against an adverse outcome.

#2: Endowment Effects

The “endowment effect” refers to our tendency to overvalue objects that we own. This psychological phenomenon was demonstrated empirically by Professors Daniel Kahneman, Jack Knetsch and Richard Thaler in their famous “mug” experiment. Half the participants were given a free mug, while the remaining participants were not. The participants who received a mug were then asked how much they would request to sell the mug, while the participants who did not receive a mug were asked how much they would be willing to pay to buy one.

The mug owners placed a significantly higher value on the mugs than the participants who did not own a mug, and were only willing to sell their mugs for a median price of $7.12, while the buyers were only willing to pay a mediation price of $2.87.

In another experiment, participants who received a chocolate bar were generally unwilling to trade it for a coffee mug of equal value, whereas participants given a coffee mug were generally unwilling to trade it for the chocolate bar.

An application of the endowment effect in retail sales is the famous “test drive” offered by many car dealerships. Giving a potential buyer the opportunity to “test drive” a new car creates a feeling of ownership, which makes the potential buyer more willing to buy the car after the “test drive.” Creating a feeling of “ownership” also motivates clothing retailers to allow prospective purchasers to try on outfits that they like in the store.

The endowment effect operates in mediations. Most obviously, as the “owner” of a claim, the plaintiff will always have built-in tendency to overvalue the claim relative to the defendant who is effectively being asked to “buy” the claim with a payment. A mediator who is not constrained by such biases can serve as an agent of reality by employing a tool such as decision tree analysis to objectively assess the “market” value of the claim.

As decision tree pioneer Marc Victor has suggested, a mediator best fulfills that role when — rather than asking the parties to exchange numbers from which they may be reluctant to move due to endowment effects — he or she instead engages the parties in a discussion of the relevant legal and factual uncertainties in the case, the probabilities of their resolution, and the range of potential damages if liability is found. Such discussions are likely to produce a more objective “market” value for the claim that can then provide the basis for further negotiation (such as with bracketing around a reasonable range).

The endowment effect also means that, in general, it is always going to be easier for a mediator to persuade a party to abandon a request for something new they want to acquire rather than to surrender something they already own (or “feel” they own). As an example, in estate planning disputes, if there are siblings who have been involved in running a family business, and other siblings who have not been involved, a solution that lets the former acquire full ownership of the business in exchange for surrendering claims to other family assets outside the business is going to be an easier sell.

Similarly, in a divorce mediation, proposing that each spouse keep assets with respect to which they have “feelings” of ownership in exchange for surrendering claims to assets with respect to which they do not, is more likely to succeed than compromises that ask spouses to surrender assets they “feel” they own.

Finally, in the transactional mediation context, Professor Scott Peppet argues that endowment effects make lawyers more resistant to modifying default contractual provisions that they have drafted and reused multiple times even in transactions where those provisions are not a good fit. Mediators not subject to such biases can break contracting impasses in the transactional context by proposing new customized provisions that better address the nuances of the deal at hand.

#3: Cognitive Dissonance 

Cognitive dissonance is the mental discomfort we feel when our conduct contradicts our beliefs. To eliminate the tension, we can either change our conduct or change our beliefs.

For example, a smoker may subconsciously feel torn between a behavior (smoking) and a belief (smoking causes lung cancer). The smoker can easily eliminate this discomfort by quitting smoking. But since it is often difficult for people to abandon longstanding behaviors that give them pleasure, a smoker may elect to change his belief (e.g., by arguing that the evidence linking smoking to cancer is biased or flawed).

How can a mediator capitalize on cognitive dissonance during mediation? When parties enter into mediation they often perceive their adversaries negatively — they’ll use adjectives such as stubborn, unreasonable, and unrealistic. The mediator’s job is to change those beliefs by encouraging conduct that is inconsistent with those perceptions.

One tool for changing perceptions is bracketing, which involves asking the parties to make reciprocal moves from their original positions. For example, a mediator might ask the defendant, “if I can persuade the plaintiff to come down to $2 million, would you be willing to come up to $500,000?” The objective is to pin down a mutually agreeable settlement range within which the parties can continue negotiating.

Because making reciprocal moves is inconsistent with being stubborn and unrealistic, one of the values of bracketing is that it helps each side to start viewing its adversary as flexible and serious about settling the case. In other words, when the conduct of another person is inconsistent with our beliefs about that person, the inconsistency can cause us to reassess those beliefs.

Making concessions also generates goodwill because of the Ben Franklin effect, a phenomenon attributed to cognitive dissonance which maintains that performing favors for someone whom you dislike increases your positive feelings towards that person (because typically you only do favors for people you like). As Franklin wrote in his autobiography concerning how he turned a rival legislator into a friend:

Having heard that he had in his library a certain very scarce and curious book, I wrote a note to him, expressing my desire of perusing that book, and requesting he would do me the favour of lending it to me for a few days. He sent it immediately, and I return’d it in about a week with another note, expressing strongly my sense of the favour. When we next met in the House, he spoke to me (which he had never done before), and with great civility; and he ever after manifested a readiness to serve me on all occasions, so that we became great friends, and our friendship continued to his death.

The Ben Franklin effect also signals the importance of promoting civility during joint sessions (because we devalue people to whom we speak rudely, and think highly of people to whom we speak courteously).

#4: Reciprocation Bias

Reciprocation bias is the obligation people feel to return favors. In other words, it is human nature to feel that a person who does a favor for me is entitled to a return action.

Mediators can capitalize on reciprocation bias during mediation by encouraging small reciprocal concessions (such as bracketing, as described above). That is, to the extent one party retreats slightly from a position, the other side will feel obligated to reciprocate. In turn, a reciprocal concession encourages further compromise by the other party. This is how negotiations build steam. 

#5: Reactive Devaluation

Reactive devaluation represents the tendency to dismiss an objectively fair proposal merely because it was suggested by an adversary. As Professor Scott Peppet explains:

Imagine that a disputant is considering two possible agreements that would resolve her dispute: Solution A and Solution B. If the disputant knows nothing about the origin of the two solutions, and does not know which solution her opponent favors, she would, all things considered, prefer Solution A. It meets her interests more completely than Solution B. Now imagine that the disputant discovers that Solution A is in fact the offer proposed by her opponent. Research shows that this information about the offer’s origin will often taint a disputant’s evaluation of the merits of the two proposals. She may no longer prefer Solution A, merely because the other side proposed it.

Mediators can neutralize the effects of “reactive devaluation” by presenting a proposal from one side to the other party, but without telling the other party that the proposal originated with its adversary. Instead, the mediator should present the proposal as his or her own idea to increase the likelihood of its acceptance.

#6: Hanlon’s Razor

There is a tendency to attribute to malice conduct that might just as plausibly be explained by more benign causes. As an example, Professor Scott Peppet cites a person who cuts you off in traffic. Studies show you are more likely to think “they are driving that way because they are inconsiderate” rather than “they may be driving that way because they are late to their child’s medical appointment.” Hanlon’s razor encourages us to give people the benefit of the doubt and assume more charitable explanations for conduct we find problematic.

Mediators should be attuned to parties assigning malicious motives to their adversaries, especially in mediations where there is a strong emotional component such as in workplace, family business and estate planning disputes. In response, mediators should encourage parties to see the dispute from their adversary’s perspective, and consider whether there are more innocent explanations for conduct they deemed objectionable. Suggesting alternative narratives helps promote reconciliation.

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