Conflict Management & Dispute Resolution report
Jessie 1
week8.pdf
WEEK 8
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Other ADR Processes and
Game Theory
Game theory for the behaviour of
firms under conflict and dispute.
How can PMs use Game Theory
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Lecture Outline
• Questions from last week
– Mediation or Arbitration?
– Is Arbitration ADR?
• Other ADR processes
• Game Theory
– Application in PM
• Bb Folder this week
Is Arbitration ADR
• The difference between Mediation and Arbitration
– Arbitrators hand down awards which are enforceable by Law [in England Arbitration Act 1996 in the world Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) (the "New York Convention")
• The 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards – known as the “New York Convention”- has been described as the most important and successful United Nations treaty in the area of international trade law. Renaud Sorieul, the Secretary of UNCITRAL has called it “the cornerstone of the international arbitration system”.
• Mediators do not hand down awards which are enforceable by Law
Mediation is ADR?
• Many other techniques
• Lots of people think mediation is the only ADR technique
• In the USA Arbitration is often thought of ADR
• In the UK Arbitration is not thought of as ADR
• Why? Long history of Arbitration in UK [England and Wales] Arbitration clause are common in Standard Forms of contract therefore projects; Arbitration Acts 1950, 1979, 1996
Other ADR Processes
• An outline of other ADR processes than civil
and commercial mediation. – Med-Arb
– Mini-trial (Executive Tribunal)
– Early Neutral Evaluation
– Expert Determination
– Dispute Review Boards DAPs DRAs
– Contracted Mediation
• Game theory!
– Cooperation
– Nudge theory
Med-arb
• Combination of mediation and arbitration where the parties agree to mediate but if that fails to achieve a settlement the dispute is referred to arbitration.
• The same person may act as mediator and arbitrator in this type of arrangement
• Wide-ranging debate on Med-Arb, few seem to have any real experience of the technique being used
• Med-arb popular in China? 6
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Mini-Trial (or Executive Tribunal)
• Voluntary non-binding process
• The parties involved present their respective cases to a panel comprised of senior members of their organisation
• The panel is assisted by a neutral facilitator and has decision making authority
• The facilitator assists the senior party representatives in their attempt to negotiate a settlement.
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History of Mini-trial/Executive Tribunal
• TRW v Telecredit
• 30 months Patent dispute
• 100, 000 documents
• 4 Hours each over 2 days to a tribunal of
executives [hence in UK Executive Tribunal]
from each side
• Settled within 30 minutes • Controlling Corporate Legal Costs: Negotiation and ADR
Techniques for Executives Kenneth James Thygerson
Executive Tribunal
• The major benefits which are proposed are:
• Senior executives become involved and realise
the nature and severity of the dispute;
• Senior executives are given an opportunity to
hear the arguments from both sides;
• Senior executives are able to meet and discuss
settlement;
• Senior executives are not constrained by legal
remedies
Early Neutral Evaluation
• Private and non-binding technique where a third
party neutral (often legally qualified), gives an
opinion on the likely outcome at trail as a basis
for settlement discussions
• ENE (insert any other technique) is simply one
tool in the toolbox of dispute resolution
• SCL paper see Blackboard
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Expert Determination
• The expert is not bound by the Arbitration Acts, in particular there is no statutory right of appeal or determination of a preliminary point of law;
• An expert’s determination is not enforceable as a judgment in the same way as an Arbitrator’s award;
• The expert makes a decision on own expertise and investigations, and is not bound to receive evidence or submissions from the parties, but is not in control of procedure, and must comply with the terms of the underlying contract from which authority is derived;
• The expert is not bound to act judicially, but merely to avoid fraud or collusion and He may also be liable to the parties for negligence;
• as an expert and not as an arbitrator – http://en.wikipedia.org/wiki/Expert_determination
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DRA; DRB [DRP] [DAP]
• Dispute Review Advisor
• Dispute Review Board [Panel]
• Dispute Avoidance Panel
– Dispute Review Panel; and dispute adjudication
panel and dispute avoidance panel
• DAP and the olympics • http://www.london2012.com/press/media-
releases/2008/04/independent-panel-set-up-to-smooth-
london-2012-construction.php
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Topical [Important?] for Project
Managers • Dispute Review Boards in forms
– DRB
– DRA
– DAP
• Why?
[email protected] 13 [email protected] 14
Dispute Review Boards
• Hong Kong Airport, $20 B
• Boston Central Artery $22 B
• Washington DC Subway ?$
• Los Angeles MTA Subway,
Contracted Mediation
• Contracted mediation attempts to fuse team building, dispute avoidance and dispute resolution in one procedure
• Contracted Mediation aims to change the culture of confrontation that threatens successful project delivery
• The mediation framework is in place throughout a project – The parties agree at the outset to manage and resolve any
differences that may arise with the assistance of a Contracted Mediation Panel which follows the project through.
• REMEMBER THERE ARE MANY OTHER ADR TECHNIQUES INCLUDING THE PETER FENN JUGGLING SPECIAL
Game Theory
• Human behaviour
• Mathematics; Economics; Philosophy;
Computer science
• Logic; it’s all things to all men
• For our purposes we are going to consider
game theory in terms of the behaviour of
firms under conflict and dispute.
• http://en.wikipedia.org/wiki/Game_theory
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Use of Game Theory
• There has been considerable recent interest in
the use of game theory to explain firms’
behaviour; one measure is the Nobel Prizes
awarded for work in the area. Thomas
Schelling was awarded a Nobel Prize in 2005;
others include William Vickrey in 1996. Elinor
Ostrom in 2009
Current Thinking
• Combine the efficiency of competition with the
benefits of co-operation.
• [See Co-opetition by Brandenburger and
Nalebuff]
• Mass collaboration Wikinomics
– http://www.wikinomics.com/blog/
• The Evolution of Co-operation Axelrod
– There’s a link on Blackboard PLEASE
PLEASE PLEASE read it
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The Evolution of Cooperation
• cooperation evolves in three stages:
– cooperation will be initiated if firms have the
opportunity for future interaction; cooperation
will NOT be initiated by scattered firms who
have little chance of future interaction;
• cooperation will thrive where many other
strategies are being tried;
• cooperation once established will protect
itself from competitive strategies.
[email protected] 19 [email protected]
Game Theory
• The science of strategy
• Analysis of fortunes where
interdependency
• See www generally
• See Co-opetition by Nalebuff and
Brandenburger
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Crowd Sourcing and Funding
• Crowdsourcing obtaining needed services, ideas, or content by soliciting contributions from a large group of people, especially from an online community, rather than from traditional employees or suppliers
• Crowdfunding (crowd financing, equity crowdfunding, crowd-sourced fundraising) collective effort of individuals who network and pool their money
[email protected] 21 [email protected]
Game theory examples
• Prisoner’s Dilemma
• Nash Equilibrium
• The problem of cooperation
• Chicken Game
• Monty Hall Problem
• Lots more
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The problem of cooperation
• Under what conditions will cooperation
emerge?: Axelrod Cooperation Theory – cooperation will break out if there are sufficient firms in the
market place so that firms have a chance of affecting any future
interaction, once its up and running cooperation will thrive where
many other strategies are being tried; and once running
cooperation established will protect itself from competitive
strategies
• Co-opetition; Creating and capturing value • Creating value is an inherently cooperative process
• Capturing value is inherently competitive
The Game Theory Approach
Positional: Win/Lose
Principled: Win/Win
Game Theory Third Way: Win/Win or
Win/Lose
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Game Theory in Dispute
Resolution – Game theory as an approach to dispute resolution
general consent that game theory provides the
appropriate tools for the analysis and eventual
resolution of disputes
– Tacit Bargaining and Information Escrow
– Ch 9&10 Commercial Conflict Management and
Dispute Resolution Fenn [Library 14 copies]
– The use of Game Theory to solve conflicts in the
project management industry J R San Cristobal at
Blackboard
Ancient and Modern
• Sun Tzu 8C BC – The Art of War
• Modern Partnering Alliancing etc
• Game theory argues against the use of
military [warlike] strategy in commerce and
business
Tacit Bargaining & Information
Escrow • When asked to pick any number at random 4 in 10
people picked the number 1;
• When asked to predict a coin toss the overwhelming
majority call heads;
• When asked to pick an amount of money almost all
people chose a figure divisible by 10;
• When people were told that they had to meet someone
else – but had to guess the time – almost all chose
noon. • Information Escrow [Harvard]
[email protected] 27 [email protected]
Game Theory and Auctions
• Types of auction
• Ascending price (English) auction Bidders offer sequentially higher prices until there is one left. Descending price (Dutch) auction Example: tulip, tobacco. Prices start high and descend until a buyer is found.
• Sealed-bid auction Each bidder makes one bid, without knowing the others.
• Second-price auctions Awarded to the highest bidder but for the second highest price, so avoiding 'winner's curse'. [Vickrey]
• Problems with auctions
– Winner's curse
– Collusion 28
Behavioural Economics
• Behavioural economics allows for irrational
behaviour and attempts to understand why
this may be the case
• Nobel Prize 2017
– Behavioural game theory
• 2020 Paul R Milgrom and Robert B
Wilson awarded prize 26 years after
game theory scholar John Nash
Game Theory to solve conflicts
in project management • The use of Game Theory to solve conflicts
in the project management and
construction industry
• José Ramón San Cristóbal – Available online at www.sciencesphere.org/ijispm
– International Journal of Information Systems and Project
Management, Vol. 3, No. 2, 2015 43-58
– In Bb Week 8 folder READ IT
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Nudge theory
• Richard Thaler’s “nudge theory” explains how small
interventions can encourage individuals to make different
decisions.
• Supermarkets
– attention can be drawn to certain products to
encourage consumers to spend money.
• Organ donation
• Tax reminders
• E-cigarettes
– 'Nudge unit' urges use of smokeless cigarettes. Why?
Smoking and preventable death
• Smoking is the leading cause of preventable death.
• Cigarette smoking is responsible for more than 480,000 deaths per year in the United States, including more than 41,000 deaths resulting from secondhand smoke exposure.
• This is about one in five deaths annually, or 1,300 deaths every day
• www.cdc.gov/tobacco/data_statistics/fact_sheets/fast_facts/ index.htm#us-smoking
Next week
• International Disputes
• Coursework Workshop [you ask questions]
[email protected] 33 [email protected]
Other ADR Processes and
Game Theory
Game theory for the behaviour of
firms under conflict and dispute.
How can PMs use Game Theory
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