Bracketed bargaining and a mediator’s proposal are useful and effective mediation tools. Each has its own role and function—which do not overlap.
These two tools are examined in a 2015 empirical study titled, “Inside the Caucus: An Empirical Analysis of Mediation from Within” [Fn. 1]. The study is based on 400 employment dispute mediations between 2008 to 2013, conducted by one of the study’s authors.
Here are the study’s findings and explanations on the two mediation tools.
Bracketed Bargaining
“A bracketed offer is one that is contingent on the other side making a concession.”
A plaintiff might say, for example, “I’ll reduce my offer to $700,000, if the defendant increases its offer to $400,000”—the two numbers, $700,000 and $400,000, are referred to as the “brackets.” Similarly, a defendant might say, “I’ll increase my offer to $200,000, if the plaintiff reduces her offer to $500,000.”
“Overlapping brackets” occur when a party responds to a bracketed offer with one of its own: i.e.,
defendant offers $200,000, if the plaintiff drops to $400,000—that’s a bracketed offer; but
if the plaintiff responds by offering $400,000 if the defendant increases its offer to $250,000, that’s an “overlapping bracket.”
The study finds that cases with bracketed offers “are only slightly more likely to settle than those in which ordinary offers and counteroffers are made.”
–That’s because bracketed bargaining is typically used when progress is stalled, an impasse is reached, or the parties are far apart.
In fact, “the condition in a bracketed offer is very seldom accepted”: i.e., if the plaintiff says “I will offer $1,000,000 if the defendant offers $500,000,” defendants very seldom respond by offering $500,000.
Yet bracketed bargaining is helpful because parties who make bracketed offers “tend to make larger concessions than those who make ordinary offers.” For example:
Plaintiffs’ bracketed offers make, on average, a 40 percent larger concession than in ordinary offers; and
Defendants’ bracketed offers make, on average, a 20 percent larger concession than in ordinary offers.
Moreover, “it is customary in employment mediations to make a bracketed offer only if one is willing to settle for the midpoint of the bracket.” So, if plaintiff offered $1,000,000 provided defendant offered $500,000, the midpoint is $750,000. If concessions are measured by this metric, “they would be much larger.”
Bracketed bargaining, therefore, is a mediation tool for bringing parties closer together when they are far apart or at an impasse. That’s its primary function and use.
Mediator’s Proposal
A mediator’s proposal, on the other hand, is a “very common closing device”—at least for Lisa Klerman. She used a mediator’s proposal frequently, and it “led to settlement almost 100 percent of the time.”
But her success with this tool is a reflection of how she used it:
When she “thinks a proposal can bridge the remaining gap” to settlement, she makes a mediator’s proposal that “she thinks both sides will accept”;
“The parties then respond confidentially to her”;
If only one party “accepts” the mediator’s proposal, the rejecting party “never finds out that the other side accepted it”; and
She “did not make a mediator’s offer she thought would be rejected.”
The study finds that a mediator’s proposal “can be harmful” when “the parties are so far apart that a mediator’s proposal would be unlikely to succeed.” If both sides reject the proposal, for example, “each might think the other had accepted it and pursue future bargaining on that mistaken assumption.” Accordingly, Lisa Klerman rarely made a mediator’s proposal when the parties’ offers were far apart.
But in all events, she made her mediator’s proposals, based on her own judgment and sense of the parties’ positions, “at the point she thought maximized the chances of settlement”:
Details of her mediator proposals “varied quite a bit”—sometimes, her proposal “was closer to the plaintiff’s last offer,” sometimes it was closer to the defendant’s; but
Her mediator proposals were “generally closer to the defendant’s last offer,” suggesting that she “generally perceived the plaintiff as more willing to make concessions.”
The study’s mediator proposal findings are “consistent with” other findings in the study, such as:
parties “tended to start their bargaining very far apart”;
”settlements are generally closer to the defendant’s initial offer than to the plaintiff’s;
“plaintiffs usually make larger concessions” from their opening offers than defendants; and
when parties accepted a mediator’s proposal, “their concessions tended to be larger than in immediately prior rounds of bargaining.”
Conclusion
Mediator proposals and bracketed bargaining are useful mediation tools. Each has its own role and function—which do not overlap:
Bracketed bargaining is a tool for bringing parties closer together when they are far apart or at an impasse; and
Mediator’s proposal is a tool for closing the deal, to be used when the mediator senses that common ground can be reached and where that ground might be.
Here’s a huge “thank you” to the authors of the study for their insights into these useful tools!
Footnote 1: The study report is by Professor of Law & History, USC Law School, Daniel Klerman, and by Clinical Professor of Law and Director, Mediation Clinic, USC Law School, Lisa Klerman, and is published in 12 Journal of Empirical Legal Studies, 686-715 (Dec. 2015). All quotes and information herein are from this report.
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