The Psychology of Settlement in High-Exposure Cases- Part 3: Why Negotiations Stall
Why Negotiations Stall
This deeper understanding of loss aversion helps explain why mediation often reaches an apparent impasse.
The numbers are close.
The legal risks are understood.
Yet no one moves.
Why?
Because the psychological of loss aversion tells us that every additional concession now feels disproportionately painful.
Behavioral economists sometimes describe this as the negotiation entering the “loss domain.”
Each incremental movement now feels larger than the previous one, even when the dollar amount remains identical.
Loss aversion produces another fascinating result.
People become surprisingly willing to gamble when they believe they are facing a loss.
This explains statements mediators hear every week.
“We’ll just let the jury decide.”
“We’ve come this far.”
“We’ll take our chances.”
Objectively, trial may expose both parties to significantly greater financial risk.
Psychologically, however, going to trial feels preferable because it preserves the possibility of avoiding today’s perceived loss.
Ironically, fear of losing often causes people to make riskier decisions.
My next and final post on the psychology of loss aversion will describe the mediator’s challenge in dealing with loss aversion and how to deal with entrenched parties who may not think they are able to settle their case.
Contact me today at 407.493.0899 or visit my Appointments page to schedule your next mediation.
