Forming Beliefs about Adjudicated Outcomes: Risk Attitudes, Uncertainty, and Reservation Values
In negotiations where disputes are resolved via adjudication (as in the courts or arbitration), beliefs about a potential adjudicated outcome are central in determining the bargaining environment. The present research investigates how negotiators (trial attorneys and students) involved in a hypothetical product liability case use information about adjudicated outcomes regarding the amount of damages in previous similar cases in forming beliefs about their own case. In particular, we examine how the parameters of the distribution of previous outcomes (variance and range) contribute to the differences between the expected outcome and the partiesâ€™ reservation values. We find that the range of earlier outcomes has no signiï¬ cant effect on subjectsâ€™ reservation values but that the variance does have a systematic effect, particularly on plaintiffsâ€™ behavior. A pair of separate ï¬ ndings may have important implications for the negotiation process. First, whether or not subjects exhibited risk averse behavior depended on the role to which they were assigned in a way that is consistent with the risk attitudes and framing notion implied by Kahneman and Tverskyâ€™s prospect theory (1979). Second, only subjects assigned to roles for which they had extensive experience exhibited over-optimism about the likely outcome.
|Date of creation:||Jan 1994|
|Date of revision:|
|Contact details of provider:|| Postal: Firestone Library, Princeton, New Jersey 08544-2098|
Phone: 609 258-4041
Fax: 609 258-2907
Web page: http://www.irs.princeton.edu/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:pri:indrel:325. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bobray Bordelon)
If references are entirely missing, you can add them using this form.