THE HIDDEN MIND GAME: WHY WE NEGOTIATE AGAINST OURSELVES BEFORE THE DEAL BEGINS
ADR, or Alternative Dispute Resolution, is a niche domain that is making rapid strides in the field of law and is increasingly becoming recognised and practised for areas of dispute that do not yield fruitful results under normal judicial intervention. Negotiation is a widely known component of ADR, which is described as “back-and-forth communication designed to reach an agreement when you and the other side have some interests that are shared and others that are opposed.”[1] Experienced negotiators conduct negotiations, yet the human element introduces subjectivity to the entire process.
The negotiators, even if they are fair and rational, may inherently have some biases or emotional processes that can interfere with the whole process. A significant psychological phenomenon that various negotiators face is how a Win-Win situation may feel like a loss situation. A Harvard Study shows how a negotiator may reject a fair deal if they think they are ‘short-charged’.[2] Various psychological traps, such as the Overconfidence Bias, Loss Aversion, Fixed Pie Bias, and Reactive Devaluation, may hinder the quality of the negotiation process and logical thinking.
This is a pertinent problem in the realm of ADR, which needs to be mitigated, as 90% of ADR processes hinge on negotiation.[3] These psychological traps in the negotiation process may lead to faulty deals, resulting in significant monetary losses and undermining this futuristic approach to dispute mitigation. This has been widely observed in various cases of negotiations, such as Fisher v. University of Texas,[4] to the Camp Davis Accords, which illustrate how loss aversion can undermine rational deals.
CORE PSYCHOLOGICAL TRAPS: MIND VS. TABLE
The process of fairness and the quality of negotiation may suffer significantly due to various faulty cognitive processes that can plague a negotiator’s mind during the proceedings. These faulty schemas are also called as psychological traps: something that inevitably a large chunk of negotiators fall into.
Loss Aversion: Humans experience the pain of loss nearly twice as intensely as the pleasure of an equivalent gain. This was scientifically backed by research conducted by Kahneman & Tversky in 1979.[5] The same phenomenon has a significant impact on both the negotiator and the parties during the dispute proceedings. In negotiation, the parties often frame concessions as losses rather than steps toward agreement, thereby downplaying any significant achievement. The parties refuse to accept the Best Alternative to a Negotiated Agreement (BATNA), even when the proposed settlement objectively increases the likelihood of a fair settlement for both parties, as they feel that accepting it would be perceived as ‘giving up’. This leads to a deal gridlock in the proceedings and inevitably prolongs and complicates the same, dissolving the very inherent purpose of ADR. The feeling of ‘giving up’ is so overpowering that the parties may even prefer to engage in high-risk litigation rather than accepting a smaller but sure gain in settlement.
Reactive Devaluation: Reactive devaluation is when negotiators reflexively reject an offer simply because it comes from the other side. Rather than evaluate the inherent value of the offer, parties assess it through a lens of mistrust- if they are offering it, it must be favourable to them, hence must disadvantage us.” Studies have shown that negotiators systematically undervalue concessions once they learn the ultimatum.[6] In negotiations with a legal component, this type of cognitive trap undermines the duty to engage in liberal, fair or open bargaining, which a party is, in theory, expected to engage in under the principles of good faith found in articles like UNIDROIT Principles of International Commercial Contracts, Article 1.7.[7] The host of consequences includes a slower pace of negotiation, increased adversarialism, and rejecting some mutually beneficial terms simply because “it was their idea.”
Fixed-Pie Bias: The fixed-pie bias occurs when negotiators assume that, in the process of negotiation, it is a zero-sum competition; whatever one team gains, the other team loses. This belief inhibits negotiators from identifying ways to create value by making integrative trade-offs, for example, exchanging issues with differing priorities, timing, cost-sharing, or other non-monetary terms. Research demonstrates that negotiators routinely leave value on the table because they believe the resources are fixed.[8] Moreover, lawyers have a professional duty, from a legal and ethical standpoint, to help clients use the negotiation process to explore mutually beneficial options that address their respective interests and objectives. The ABA Model Rule 2.1 anticipates that lawyers provide frank and independent advice, considering factors beyond positional bargaining. [9]A fixed-pie assumption causes rigid positional behaviour to take hold and dampens the incentive to disclose interests, leading to low-value settlements.
Overconfidence Bias: Overconfidence bias is the tendency to overestimate one’s bargaining power and probability of winning in a lawsuit or arbitration. Research on negotiation indicates that nearly 80% of negotiators believe they are above-average negotiators, and as a result, hold unreasonable high reservation prices and reject reasonable settlement offers.[10] In legal settings, overconfidence increases the likelihood of an impasse and encourages parties to pursue injurious dispute resolution processes, such as arbitration. The problem of overconfidence is particularly troublesome when the party believes their chance of winning in arbitration is almost inevitable, only to receive an unfavourable award that farmers must enforce, perhaps under the New York Convention.[11] Overconfidence encourages parties to inflate their expectations and discount risk, turning negotiation from an opportunity to solve problems into a means to escalate the dispute unnecessarily.
CASE STUDIES: PSYCHOLOGY ON TRIAL
Case 1: Camp David Accords (1978) → Loss Aversion: Initially, Israel did not support Egypt’s proposal of “land-for-peace” because Israel viewed withdrawing territory from the Sinai Peninsula as a loss of security. From psychology, the principle of loss aversion suggests that the pain of a loss is perceived as almost twice the pleasure of a gain of the same size.[12] This frame of reference influenced Israel to minimise its participation in the negotiations.[13] Losing land equated to Israel losing safety, even when potentially gaining long-term regional stability. In the negotiations, President Jimmy Carter successfully reframed the discussion, not as Israel losing land, but rather as Israel gaining permanent peace and recognition from Egypt, the strongest regional military power.[14] The negative frame of reference lost its power for Israel. The eventual Egypt-Israel Peace Treaty (1979) became one of the longest-lasting diplomatic agreements in Middle Eastern history and is a strong example of how reframing can reduce losses and generate gains in mediation.
Case 2: Fisher v. University of Texas (U.S. Supreme Court, 2016) → Reactive Devaluation: Abigail Fisher sued the University of Texas, in part, to challenge its admissions policy that utilised a race-conscious component as part of a holistic review process when considering potential students for admission. Fisher argued that the university’s policy improved diversity, but it undermined merit.[15] The admissions policy was deemed a case of reactive devaluation by a party. The plaintiffs devalued the potential of the admissions policy simply because it was offered or proposed by the opposition (UT). Even with the data potentially offering a way to expand access, but without compromising quality, the plaintiffs devalued any evidence of legitimacy.[16] The Supreme Court of the United States ruled in favour of the University. It ultimately upheld their policy with a 4–3 decision, declaring that such an approach satisfies a compelling educational interest.
Case 3: Texaco–Pennzoil Verdict (1985) → Fixed-Pie and Overconfidence: The negotiations over Getty Oil became mired in a zero-sum mentality. Pennzoil reasoned that for Texaco to gain, Pennzoil must lose; meanwhile, Texaco grossly overestimated its legal standing and actively interfered with the tentative agreement.[17] Both sides disregarded a joint-venture alternative that would have net positive value. The jury rendered a historic $10.53 billion judgment (which was eventually settled for $3 billion) for tortious interference, exposing the results of overconfidence and fixed-pie bias, as combined with conflicting-party negotiations in a commercial context.[18]
PRE-NEGOTIATION: SETTING THE FRAME
Before requesting offers from a counterpart, parties must exchange objective criteria (statutory benchmarks or regulatory thresholds for future contingents, valuation reports when applicable, or industry standards) to help frame the negotiation in a space of legitimacy rather than emotions. “Logically”, speaking, negotiators can pre-commit to a fairness checklist, for instance, “List three gains the other side gets if the deal succeeds.” This will generate cooperative thinking and decrease loss aversion.
At the Table: Create Joint Value: Mediators should begin by using interest mapping, which requires parties to state their reasons for wanting something before engaging in bargaining or negotiations, thereby clarifying their interests and reducing reactivity to devaluation.[19] Logrolling, as a psychological tool of negotiation, involves trading low-priority items for high-priority gains, thereby disrupting the assumption of a fixed pie and increasing total value.[20]
Closing: Mitigate Fear of Risk: Legally, contingent clauses (such as earn-outs and performance trigger clauses) can be used not only to translate predictions into testable conditions but also to reduce loss aversion by deterring uncertainty.[21] Psychologically, future pacing (for visualisation) shifts the conversation from threat to rewards by describing the success barometer for post-deal scenarios.[22]
Training: Workshops on interdisciplinary negotiation, including Harvard negotiation, serve not only to integrate law and behavioural psychology for applied debiasing.[23]
Author’s Name: Ananya Sharma (Dr Ram Manohar Lohiya National Law University, Lucknow)
[1] Program on Negotiation at Harvard Law School, ‘What is Negotiation?’ (PON Harvard, 19 February 2020) <www.pon.harvard.edu/daily/negotiation-skills-daily/what-is-negotiation> accessed 4 November 2025.
[2] Program on Negotiation at Harvard Law School, ‘Why Negotiations Fail’ (PON Harvard, 19 February 2020) <www.pon.harvard.edu/daily/negotiation-skills-daily/why-negotiations-fail/> accessed 4 November 2025.
[3] Miller S, ‘The problems and benefits of using alternative dispute resolution’ (Thomson Reuters Legal Insights) <https://legal.thomsonreuters.com/en/insights/articles/problems-and-benefits-using-alternative-dispute-resolution> accessed 4 November 2025.
[4] Fisher v University of Texas 579 US 365 (2016).
[5] Kahneman D and Tversky A, ‘Prospect Theory: An Analysis of Decision under Risk’ (1979) 47 Econometrica 263.
[6] Program on Negotiation at Harvard Law School, ‘Four Strategies for Making Concessions in Negotiation’ (PON Harvard, 13 October 2020) <https://www.pon.harvard.edu/daily/negotiation-skills-daily/four-strategies-for-making-concessions/> accessed 4 November 2025.
[7] International Institute for the Unification of Private Law, UNIDROIT Principles of International Commercial Contracts 2016 (UNIDROIT 2016) art 1.7.
[8] Michelle Martin-Raugh and others, ‘Negotiation as an Interpersonal Skill: Generalizability of Negotiation Outcomes and Tactics Across Contexts at the Individual and Collective Levels’ (2020) 104 Computers in Human Behaviour 1< https://doi.org/10.1016/j.chb.2019.03.030> accessed 4 November 2025
[9] American Bar Association, Model Rules of Professional Conduct (ABA 2020) r 2.1.
[10] Max H Bazerman and Margaret A Neale, Negotiating Rationally (Free Press 1992) 33–34.
[11] Convention on the Recognition and Enforcement of Foreign Arbitral Awards (adopted 10 June 1958, entered into force 7 June 1959) 330 UNTS 3 (New York Convention) art V(1)(d).
[12] Daniel Kahneman and Amos Tversky, ‘Prospect Theory: An Analysis of Decision under Risk’ (1979) 47 Econometrica 263.
[13] Jimmy Carter, Keeping Faith: Memoirs of a President (Bantam Books, 1982).
[14] United States Department of State, Office of the Historian, ‘The Egypt–Israel Peace Treaty (1979)’ <https://history.state.gov/milestones/1977-1980/camp-david> accessed 04 November 2025.
[15] n (4).
[16] Cass R Sunstein, ‘The Constitution and the University: Affirmative Action after Fisher v. University of Texas’ (2016) Harvard Law Review Forum <https://harvardlawreview.org> accessed 04 November 2025.
[17] Pennzoil Co v Texaco Inc 481 US 1 (1987).
[18] Steven M Davidoff Solomon, ‘Texaco, Pennzoil and the Lessons of a $10 Billion Verdict’ (New York, 12 October 2012) <https://dealbook.nytimes.com> accessed 04 November 2025.
[19] American Bar Association Section of Dispute Resolution, Mediation Practice Guidelines (ABA 2007).
[20] n(10).
[21] Ibid.
[22] Gary Klein, Sources of Power: How People Make Decisions (MIT Press 1998) 205–210.
[23] Harvard Negotiation Project, Program on Negotiation at Harvard Law School <https://www.pon.harvard.edu> accessed 04 November 2025.
