Academic

Start with what we were taught in grade school: lying is wrong. But the reality of contractual negotiations is a little more complicated. My thought is that some forms of deceit are accepted rules of the game, some are forbidden by law and/or social norms, but I don't completely understand how to justify the difference. And, though there is some interesting work in L&E about the efficiency limits of posturing in bargaining, especially regarding the effect of the discovery process in forcing efficient settlement, current law and business literature on negotiations seems to have left a gap in this area.

Consider an accepted practice, bluffing. Say I were honored one day by a visiting spot at Illinois with Christine, Vic, and Larry. And, against the odds, I get an offer to stay! But I miss my friends in DC, and decide not to take it. I get back, sit down with my Dean, we talk about my contract. He says: "What's it going to take to get you to stay?" I say, "Well, I don't know, Champaign is tempting, and the fighting Illini rock." Then I respond with a figure higher than the absolute minimum it would take to get me to stay. Or, turn the tables, I respond: "What's the maximum you are willing to offer?" The Dean responds with a figure lower than the maximum he would be willing to squeeze out of the budget for me. Is either response surprising? I think this is a practice most of us would engage in, in fact I claim we would be fools not to. It's an accepted rule of the game. But it is, without any doubt, DECEITFUL! (except the fact that the Illini do rock, within their conference).

Thinking about norms, my initial intuition is that misdirection about one's own personal need to bargain or willingness to pay is socially accepted, where outright deceit about the quality of the product one is selling is not. If I were to deceive about having received an offer from the other school, that's fraud and it becomes an issue, and the law reflects this social norm. The jurisprudence surrounding common law fraud, implied warranties, and the implied covenant of good faith and fair dealing are not constructed to include all forms of deceit, but seem to deal with representations about the value of what is offered more so than representations regarding personal price boundaries for the deal.

Beyond norms and liability, the prospect of repeat play changes the equation of course. This is an interesting tenet of game theory, but I want to set that aside for a moment. Keeping the issue simply to one-time negotiations, why are some forms of deceit acceptable but some are not? Is it an efficiency question? Penalizing certain forms of deception enhances the integrity of the market, encouraging more commerce? An enforcement cost issue, we only go after some forms of deceit because they exhibit lower detection costs relative to the damage it could do? Or is it an equity issue, rooted in privacy rights? As in, you have no right to ask me how much I'm willing to pay/demand for what you're selling/buying. Or, an equity issue rooted in distributive justice? As in, I have the right as a consumer to use misdirection to gain some leverage in the bargain over the seller and conserve my scarce resources to provide for my family? And do your answers to these questions change if I go from being a buyer to being a seller, or being a party with low negotiating leverage to being one with high leverage?

And, if I have convinced you that there are some forms of deceit that are accepted in contractual negotiations, the next question becomes...what strategies will allow me to use this to my maximum advantage?

One easy recommendation is to point to an outside force that limits your own ability to bargain. When I purchased my used Volvo from the dealer (I admit I'm a walking cliche, I also recently picked up a wool jacket with patches and a pipe), I claimed to the Volvo car dealer that I had credit issues and I had to take a loan from my parents limited in amount. All untrue. (Ask yourself, as you read this, did you think I did wrong? If not, is it because my misdirection related to my privacy right regarding my own ability to pay, or the fact that Volvo pre-owned car dealers typically have a bargaining advantage, or some efficiency concern, or the cost of enforcing a disclosure mandate?) The result, I am proud to say...after three weeks of haggling...a 15% discount off the internet listed price.

If I admitted to the Dealer after the fact that I was deceptive about my personal budgetary constraints, I don't believe he would hold it against me. In fact, I imagine he would begrudgingly admire my gamesmanship. Even if he didn't, is there any judge in the world that would rule in his favor? And under what theory? And what still do not fully grasp, and the point of my post...WHY!