Why Some Men Negotiate Irrationally

A study by Harvard economist Terence Burnham explains why some men make seemingly irrational negotiating decision. Burnham's research employed the "ultimatum game," in which two parties interact anonymously and only once, so reciprocation is not a strategic issue. In the game, the first player offers to divide a sum of money with the second party. If the second player rejects this division, neither gets anything. If the second accepts, the first gets his demand and the second gets the rest. Economically rational players should accept any amount of money proposed, yet some men chose to rather forgo a financial windfall than see the other player get more. Tests then revealed that men with higher testosterone levels were more likely to make the "irrational" choice. Burnham’s research thus indicates that people
really strive for is relative rather than absolute prosperity. (The Economist.)

As a former economist now working in dispute resolution, I have often been baffled by parties who are unwilling to accept a settlement because their personal outcome was perceived as relatively inferior. In many cases, it is nearly impossible to convince a party to settle, even if his or her pre-negotiation (economically rational) objectives would be met. This research indicates that it may be critical to address subjective issues of relative fairness to reach resolution.