Three Schools of Bargaining Ethics

Three Schools of Bargaining Ethics

The three schools of bargaining ethics I want to introduce for your consideration are (1) the “It’s a game” Poker School, (2) the “Do the right thing even if it hurts” Idealist School, and (3) the “What goes around, comes around” Pragmatist School.

Let’s look at each one in turn. As I describe these schools, try to decide which aspects of them best reflect your own attitudes. After you figure out where you stand today, take a moment and see if that is where you ought to be. My advice is to aim as high as you can, consistent with your genuinely held beliefs about bargaining. In the pressured world of practice, people tend to slide down rather than climb up when it comes to ethical standards.

The “It’s a Game” Poker School

The Poker School of ethics sees negotiation as a “game” with certain rules. The rules are defined by the law. Conduct within the rules is ethical. Conduct outside the rules is unethical.

The modern founder of the Poker School was Albert Z. Carr, a former special consul- tant to President Harry Truman. Carr wrote a book in the 1960s called, appropriately enough, Business as a Game. In a related article that appeared in the Harvard Business Review, Carr argued that bluffing and other misleading but lawful negotiating tactics are “an integral part of the [bargaining] game, and the executive who does not master [these]

techniques is not likely to accumulate much money or power.” People who adhere to the Poker School readily admit that bargaining and poker are

not exactly the same. But they point out that deception is essential to effective play in both arenas. Moreover, skilled players in both poker and bargaining exhibit a robust and realis- tic distrust of the other fellow. Carr argues that good players should ignore the “claims of friendship” and engage in “cunning deception and concealment” in fair, hard-bargaining encounters. When the game is over, members of the Poker School do not think less of a fellow player just because that person successfully deceived them. In fact, assuming the tactic was legal, they may admire the deceiver and vow to be better prepared (and less trusting) next time.

We know how to play poker, but how exactly does one play the bargaining “game”? Stripped to its core, it looks like this: Someone opens, and then people take turns proposing terms to each other. Arguments supporting your preferred terms are allowed. You can play or pass in each round. The goal is to get the other side to agree to terms that are as close as possible to your last proposal.

In the bargaining game, it is understood that both sides might be bluffing. Bluffs disguise a weak bargaining hand—that is, the limited or unattractive alternatives you

have away from the table, your inability to affect the other side’s alternatives, and the arguments you have to support your demands. Unlike poker players, negotiators always attempt to disclose a good hand if they have one in the bargaining game. So the most effective bluffs are realistic, attractive, difficult-to-check (but false) alternatives or author- itative (but false) supporting standards. Experienced players know this, so one of the key skills in the bargaining game is judging when the other party’s alternatives or arguments are really as good as he or she says. If the other side calls you on your bargaining bluff by walking away or giving you a credible ultimatum, you lose. Either there will be no deal when there should have been one, or the final price will be nearer to their last offer than to yours. As mentioned, the Poker School believes in the rule of law. In poker, you are not allowed to hide cards, collude with other players, or renege on your bets. But you are expected to deceive others about your hand. The best plays come when you win the pot with a weak hand or fool the other players into betting heavily when your hand is strong. In bargaining, you must not commit outright, actionable fraud, but negotiators must be on guard for anything short of fraud.

The Poker School has three main problems as I see it. First, the Poker School pre- sumes that everyone treats bargaining as a game. Unfortunately, it is an empirical fact that people disagree on this. For a start, neither the idealists nor the pragmatists (more on these next) think bargaining is a game. This problem does not deter the Poker School, which holds that the rules permit its members to play even when the other party disagrees about this premise.

Second, everyone is supposed to know the rules cold. But this is impossible, given that legal rules are applied differently in different industries and regions of the world.

Finally, the law is far from certain even within a single jurisdiction. So you often need a sharp lawyer to help you decide what to do.

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