Promoting Honesty in Negotiation: An Exercise in Practical Ethics

In a competitive and morally imperfect world, business people are often faced with serious ethical challenges. Harboring suspicions about the ethics of others, many feel justified in engaging in less-than-ideal conduct to protect their own interests. The most sophisticated moral arguments are unlikely to counteract this behavior. We believe that this morally defensive behavior is responsible, in large part, for much undesirable deception in negotiation. Drawing on recent work in the literature of negotiations, we present some practical guidance on how negotiators might build trust, establish common interests, and secure credibility for their statements thereby promoting honesty We also point out the types of social and institutional arrangements, many of which have become commonplace, that work to promote credibility, trust, and honesty in business dealings. Our approach is offered not only as a specific response to the problem of deception in negotiation, but as one model of how research in business ethics might offer constructive advice to practitioners.Credibility; Business Ethics; Negotiations; Institutions

Side-Payments and the Costs of Conflict.

Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 87% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 39% of gains come from avoided conflicts and 61% from reduced conflict expenditures.contests, conflict resolution, side-payments, experiments

Leveraging the Honor Code: Public Goods Contributions under Oath

Real economic commitment (or the lack of it) of others affects a person's preferences to cooperate. But what if the commitment of others cannot be observed ex ante? Herein we examine how a classic non-monetary institution– a solemn oath of honesty –creates economic commitment within the public goods game. Commitment-through-the-oath asks people to hold themselves to a higher standard of integrity. Our results suggest the oath can increase cooperation (by 33%)– but the oath does not change preferences for cooperation. Rather people react quicker and cooperate, taking less time to ponder on the strategic free riding behavior

Make Him an Offer He Can’t Refuse: Avoiding Conflicts through Side Payments

The equilibrium of a two-stage conflict game with side-payments predicts that with binding stage-one offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 98% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 49% of gains come from avoided conflicts and 51% from reduced conflict expenditures.contest, conflict resolution, side payments, experiments

The Market for Liars: Reputation and Auditor Honesty

In the model there are two types of financial auditors with identical technology, one of which is endowed with a prior reputation for honesty. We characterize conditions under which there exists a "two-tier equilibrium" in which "reputable" auditors refuse bribes offered by clients for fear of losing reputation, while "disreputable" auditors accept bribes because even persistent refusal does not create a good reputation. The main findings are: (a) honest auditors charge higher fees, and have economic profits accruing to reputation; (b) as the fraction of auditors who are honest increases, the premium charged by reputable auditors eventually decreases, which diminishes the incentive to refuse bribes; (c) if the fraction of honest auditors exceeds an upper bound, there does not exist a two-tier equilibrium; (d) thus the reputation mechanism may be undermined by entry into the honest segment of the industry, if it is possible; (e) increasing auditor independence increases the upper bound.

Norms and Law: Putting the Horse Before the Cart

Law and society scholars have long been fascinated with the interplay of formal legal and informal extralegal procedures. Unfortunately, the fascination has been accompanied by imprecision, and scholars have conceptually conflated two very different mechanisms that extralegally resolve disputes. One set of mechanisms might be described as the shadow of the law, made famous by seminal works by Professors Stewart Macaulay and Marc Galanter, in which social coercion and custom have force because formal legal rights are credible and reasonably defined. The other set of mechanisms, recently explored by economic historians and legal institutionalists, might be described as order without law, borrowing from Professor Robert Ellickson\u27s famous work.1 In this second mechanism, extralegal mechanisms—whether organized shunning, violence, or social disdain—replace legal coercion to bring social order and are an alternative to, not an extension of, formal legal sanctions. One victim of conflating these mechanisms has been our understanding of industry-wide systems of private law and private adjudication, or private legal systems. Recent examinations of private legal systems have chiefly understood those systems as efforts to economize on litigation and dispute-resolution costs, but private legal systems are better understood as mechanisms that economize on enforcement costs. This is not a small mischaracterization. Instead, it reveals a deep misunderstanding of when and why private enforcement systems arise in a modern economy. This Essay provides a taxonomy for the various mechanisms of private ordering. These assorted mechanisms, despite their important differences, have been conflated in large part because there has been a poor understanding of the particular institutional efficiencies and costs of the alternative systems. Specifically, enforcement costs have often been inadequately distinguished from procedural or disputeresolution costs, and this imprecision has produced theories that inaccurately predict when private ordering will thrive and when the costs of private ordering overwhelm corresponding efficiencies. The implications for institutional theory are significant, as confusion in the literature has led to overappreciation of private ordering, underappreciation of social institutions, and Panglossian attitudes toward both lawlessness and legal development

Federal Rules of Evidence and the Political Process

An important tenet of American evidence law is the strict regulation on the introduction of character evidence. This principal has begun to be chipped away at through the adoption of amendments that allow character evidence to be introduced in certain types of cases. The Federal Rules of Evidence were subject to very little amendment during their first 20 years of use, and have always represented a blend of conservatism about evidence law and political compromise. This tension has been kept in check until the proposal of Rules 413-415, which represents a concession to the politicization of the rules. Before imposing such a drastic change, Congress should be sure that their proposal is backed by strong empirical evidence

“Confiar com um olho e desconfiar com o outro”: as negociações entre catireiros da região do Triângulo Mineiro e Alto Paranaíba

Although negotiation is regarded as one of the most fruitful business activities to address trust and honesty in decision making, studies on this topic are still necessary for the conceptual advancement of the field. This paper aims to analyze the relationships based on trust and honesty among the catireiros based in the Triângulo Mineiro and Alto Paranaíba mesoregions of the state of Minas Gerais, Brazil, in their negotiations. To achieve the proposed goal, we performed qualitative research, with an exploratory approach. Data was collected through semi-structured interviews with 31 catireiros of the Triângulo Mineiro and Alto Paranaíba regions and analyzed according to the postulates of French Discourse Analysis. We concluded that, on the one hand, honesty and trust are paramount for some catireiros and contribute to the strengthening of their prestige and reputation withing the groups in which they are inserted. In other words, these values operate as a way of legitimizing who those catireiros are and how they negotiate. On the other hand, the catira is also characterized as a potentially opportunistic practice, which may involve mistrust, lies, manipulation, and dishonesty as elements inherent to its process and conditions for traders to obtain advantages in their catiras.Embora a negociação seja considerada uma das atividades empresariais mais profícuas para se compreender a confiança e a honestidade na tomada de decisões, estudos sobre tal temática ainda são necessários para o avanço conceitual na área. Dessa forma, o objetivo que norteou este trabalho foi analisar as relações baseadas na confiança e honestidade entre os catireiros da região do Triângulo Mineiro e Alto Paranaíba em suas negociações. Para atingir o objetivo proposto, utilizou-se da abordagem da pesquisa qualitativa, de caráter exploratório. A coleta de dados foi feita mediante entrevistas semiestruturadas com trinta e um catireiros da região do Triângulo Mineiro e Alto Paranaíba e a análise de dados foi feita por meio da Análise de Discurso Francesa. Assim, é possível afirmar que para alguns catireiros a honestidade e a confiança são imprescindíveis e contribuem para o fortalecimento do seu prestígio e da sua reputação no grupo em que estão inseridos, funcionando, então, como forma de legitimar quem são aqueles catireiros e a maneira como eles negociam. Por outro lado, a catira também se caracteriza como uma prática potencialmente oportunista que pode evidenciar a desconfiança, a mentira, a manipulação e a desonestidade como inerentes ao seu processo e como condições para um negociante obter vantagens nas catiras