expand_more

Getting the Most of the Things You Care About: Maximizing Expected Utility in Conflict Resolution


Getting the Most of the Things You Care About: Maximizing Expected Utility in Conflict Resolution
00:00
/
00:00
1xSpeed

KEY POINTS

Economics Beyond Money: Economics isn't just about financial gains; it's about optimizing what people value most, such as satisfaction or happiness. In conflict resolution, this insight helps professionals focus on what each party prioritizes and values beyond just monetary outcomes, leading to more effective resolutions.
Rational Decision-Making: Conflict resolution benefits from understanding that each party operates under its own rational preferences. These preferences, while different for each individual, drive decision-making. Recognizing and working within this framework helps conflict resolvers craft strategies that align with the parties' true priorities.

Marginal Utility and Evolving Preferences: Marginal utility explains how the value of certain benefits diminishes over time. In conflicts, parties' preferences may shift as they receive more of what they initially wanted. Skilled conflict resolvers adapt by considering these shifts to create solutions that remain balanced and satisfying as negotiations progress.

Economics Beyond Money
author
Richard Birke Lead Facilitator and Trainer

In a previous blog post, we discussed the eight sub-disciplines that inform the work of professional conflict resolvers. Now, let's dive deeper into one of the most foundational areas: economics. Though it may seem like the domain of financial professionals and policymakers, economics and conflict resolution are interconnected, and economic principles can inform strategies for conflict resolution.

Economics Is Not Just About Money

Contrary to popular belief, economics is not just about dollars and cents. Economists are less concerned with money as a physical object and more focused on how people optimize what they value—whether that's profit, satisfaction or happiness. In conflict resolution strategies, understanding these principles helps us assess how parties involved in disputes prioritize their interests and what motivates their choices, potentially leading to more effective dispute resolution. The goal of a top-tier conflict resolver is to help parties identify and maximize the things they care about, and those things may be more complex than dollars and cents (even though dollars and cents will still play a big role in the resolution of many disputes).

Rational Decision-Making: A Key Principle

At its core, economics relies on the concept of rational decision-making. This principle suggests that people make choices that best align with their preferences, whatever those may be. In conflict resolution, recognizing that each party is operating under its own set of rational preferences can shift the way we approach problem-solving. Rather than judging the merits of the preferences themselves, conflict resolvers focus on rational decision-making in conflict, helping parties make decisions that align with their stated priorities.

For example, consider a negotiation where one party values time off over financial compensation. Their decision to prioritize vacation days might seem irrational to an outsider focused on monetary gain, but for the individual, this preference may maximize their utility. Recognizing this can contribute to more meaningful conflict resolution economic models. Utility is in the eye of the beholder, and a skilled professional will make sure they help parties make decisions that best serve their interests.

Marginal Utility and Shifting Preferences

Another critical concept from economics is marginal utility, which refers to the way the value or satisfaction derived from a particular good decreases as one consumes more of it. Applied to conflict resolution, this can explain why parties’ positions may shift over time. If a party consistently receives a certain benefit (e.g., flexibility in work hours), its value may diminish, making other concessions more attractive.

In long-running disputes, understanding how preferences evolve can open new pathways to resolution. A skilled conflict resolver, much like an economist, takes into account these shifting priorities and designs solutions that allow for a balanced and mutually satisfying outcome by incorporating incentive structures in resolution to achieve lasting agreements. They take into account the fact that as a party receives some of what they are asking for, their preferences might shift, and so should the bargaining.

Economic Principles in Conflict Resolution as a Decision-Making Tool

Ultimately, the principles of economics and mediation—such as decision trees, cost-benefit analyses and risk forecasting—can offer conflict resolvers powerful tools to guide parties through complex decision-making processes. By framing disputes in terms of optimizing each party’s utility, we can help facilitate clearer, more strategic choices, potentially leading to outcomes that feel fair and beneficial for those involved. These economic insights in dispute resolution can offer a structured approach to addressing conflicts more efficiently, especially when combined with bargaining strategies and game theory negotiation principles.

There’s much more to cover on this subject. After all, people spend years getting Ph.D.s in economics. And this is a blog post, not a dissertation. The point is that a great conflict resolver understands how principles of economics and economic decision-making play a critical role in the motivations behind people’s bargaining strategies and the satisfaction they enjoy after a successful outcome.

In our next post, we’ll explore another discipline that plays a key role in conflict resolution: psychology. Stay tuned to discover why it’s so challenging for people to make rational decisions in emotionally charged situations and how conflict resolvers can use psychological insights to foster better outcomes.

If you're interested in how economic principles can enhance your conflict resolution strategies, subscribe to our newsletter to stay informed about upcoming content in this series, or learn more about our conflict resolution trainings and services. 

Disclaimer:
This page is for general information purposes. JAMS makes no representations or warranties regarding its accuracy or completeness. Interested persons should conduct their own research regarding information on this website before deciding to use JAMS, including investigation and research of JAMS neutrals. While the content above was written and reviewed by members of JAMS Pathways, it was partially generated using AI tools.
Book Free Call Image

Start Your Journey Now

Book a Free Discovery Call

Restore workplace unity and maximize employee performance.
Book a discovery call today.
SCHEDULE YOUR CALL
book free call bullet icon

Customized Client Solutions

There’s no one way to run a healthy organization, and our pricing is as customized as our approach. Let’s talk about your needs.

Download our streamlined guide

The Leader's Blueprint to Managing Conflict

In this practical, step-by-step playbook, our experienced facilitators explain how to efficiently resolve workplace conflict to create unity and drive mission-focused success.

play-book
Fab question icon