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Game Theory & Settlement Negotiations

February 5, 2021

Over 90% of cases settle, though it could take months or even years before settlement discussions become serious for all parties involvedThere are methods to help legal teams expedite these discussions, and one of our renowned experts has pioneered a process using game theory that achieves just that.  

On a recent episode of Round Table Group’s podcast we spoke with forward-thinking expert, Bruce Bueno de Mesquita. Bruce is an Emeritus Senior Fellow with the Hoover Institution, and the Silver Professor of Politics at New York University. Using game theory, Bruce helps legal teams figure out what a likely settlement agreement will look like and how to change that amount by making it higher or lower based on several techniques, arguments, persuasion, and other skills.  

Game Theory Explained 

As Bruce explains, “Applied game theory is a way of understanding how people deal with each other strategically, considering what they believe the other person is going to do if they make this choice, that choice, or a different action. It is playing multidimensional chess. 

Game Theory in Litigation 

When legal teams enact Bruce’s dynamic model during litigation, it illuminates the potential actions that the opposing party will take and what will make them take an action that is ideal for you and your client. Bruce has computerized this process over the last 30 years. There are essential questions that inform the outcome, and if the answers to these questions are understood, Bruce can determine what everyone will do and agree to with more than 90% accuracy. This then makes it probable that an attorney can influence the opposition to agree to an outcome that is closer to what they want than what the other side wants.  

Bruce’s model has been used on several occasions, and on average it produces 25 to 40% better settlement terms than the client expected. In fact, the CIA conducted a study that found that Bruce’s predictions for the computer model hit the bullseye twice as often as their own analysts’ predictions 

As negotiations evolve over time, Bruce’s model allows for the input of new metrics, meaning that it is dynamic. Bruce explains, “It is not just constantly updating the information, the model has already projected step by step how the process will unfold and gives you insights into when we should stop talking and take this deal, because it is going to head in a bad direction, perhaps in the future, or it is getting better, and we should keep talking. There are times when new things are learned, where there is a realization that you need to make some change to the inputs because there’s been an external shock, which has changed the trajectory. 

Bruce’s story is a fascinating one, and his use of game theory in settlement discussions has transformed how litigators approach this common stage of litigation. We were delighted to speak with him in detail on his work with litigators and how legal teams can improve the odds of successful negotiations. You can find the episode in its entirety, and listen to all other episodes of the Discussions at the Round Table podcast.

For more than 25 years, Round Table Group has helped litigators locate, evaluate, and employ the best and most qualified expert witnesses. Round Table Group is a great complement to any litigator’s quest for an expert witness and our search is always free of charge. Contact us at 202-908-4500 for more information or start your expert search now.

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