Logrolling "win-win" settlement in construction dispute mediation


Student thesis: Master's Thesis

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  • Yingying QU


Awarding Institution
Award date15 Jul 2011


Conflict and dispute regularly feature in the construction industry. Mediation is generally regarded as an effective means to resolve disputes due to its flexibility, cost-effectiveness and non-threatening process. Reaching "win-win" settlement is the desired outcome of mediation. A "win-win" settlement can be seen as one that encourages parties to uphold their contracts when one party achieve its profits and the other party would still be better off. However, this desired outcome is not always achieved. Logrolling is an effective strategy for achieving integrative trade-off, by which each party concedes on low priority issues in exchange for concessions on issues of higher priority to themselves. There is no literature on the empirical work of logrolling to mediate a "win-win" settlement. This research fills the gap by studying the effectiveness of logrolling to assist disputants to achieve "win-win" settlement. Logrolling can be described as procedures that generate jointly improving proposals from non-Pareto optimal alternative towards a Pareto optimal alternative. However these logrolling models follow the solution path which guides parties negotiate over inefficient offers and end with an efficient compromise, in which way negotiators have to consider offers which they should never choose. Highest-level integrative agreements are considered efficient. Efficiency in negotiations is in some sense, equivalent to the efficient frontier. Therefore a conceptual model of logrolling in mediation is proposed through which parties could improve the joint value by bargaining exchange and get convergence along the efficient frontier. Parties are proposed to begin with their most preferred position and concede at minimum loss in exchange for maximum benefit to the other party. To achieve it, a multi-objective decision making (MODM) model is employed to propose approximate efficient frontier and assist parties to engender "win-win" settlement. To operationalize the conceptual model, a web-based mediation system is developed to facilitate parties to achieve "win-win" settlement in a user-friendly environment. The system can be accessed on website http://www.cdrru.org:8000/mediation/. The system includes 3 processes: reality test, preference identification and logrolling. Reality test is proposed to test parties' concession rate and assist disputing parties to get ready for achieving "win-win" settlement. The preference identification is designed to assist parties to identify the preference of each bargaining alternative. Reality test and preference identification are designed for logrolling information collection. The logrolling process is to provide user-friendly suggestions for parties to make efficient trade-off, which involves (1) when to concede; on which issue (3) for which party and (4) how much should be conceded. Based on the above conceptualization, a mediation experiment is used to examine whether the mediation system can assist parties to achieve the "win-win" settlement, where the mediation system is to serve as a mediator in action. The experiment is designed to collect data to compare (1) the logrolling outcomes between accepting the mediator's suggestion and those rejecting the mediator's suggestion; (2) the logrolling outcomes between far from efficient frontier and close to efficient frontier; (3) expected logrolling outcomes and actual logrolling outcomes. As for the evaluation requirement, it should be under the same logrolling data set to evaluate objectives (1) and (2). It is better to examine objective (3) under customized logrolling data set. In this research, objective (3) is evaluated both under the same logrolling data set and under customized logrolling data set, so that the differences in results under the two situations can be illustrated for comparison. The experiment has two stages. In Stage I the experiment is conducted 'under the same logrolling data set'. In Stage II the experiment is conducted 'under customized logrolling data set'. The results are evaluated by 4 criteria: joint value, concession rate, substitute rate and welfare rate in examining objective (1). The substitute rate is taken to be one party's loss in terms of the other party's gain. The welfare rate is taken to be the gain in joint value in terms of one party's loss. The results positively support the hypothesis that accepting the mediator's suggestion can achieve greater joint value, make greater integrative concessions, reduce substitute rate and enhance welfare rate in bargaining exchange, than those rejecting the mediator's suggestion. Efficient frontier in economics, is where alternative is worse than what they could achieve. Based on the concept of efficient frontier, the mediation system is developed to assist parties to achieve the "win-win" settlement. It is believed that the subjects moving closer to the efficient frontier can achieve greater joint value, make greater concession, with lower substitute rate and higher welfare rate, than those farther from the efficient frontier. The results are evaluated by the concession level, joint value level, substitute level and welfare level, which represent to what extent the outcomes are optimal or how much room for improvement. The results show that the closer to the efficient frontier, the lesser the room of improvement on concessions and joint value, and the more optimal the substitute rate and welfare rate. Thus efficient Frontier theory can be used to support the mediation system to facilitate negotiators to achieve "win-win" settlement. The logrolling-difference degree (L-DD) is defined as the measure for comparison between expected logrolling outcomes and actual logrolling outcomes. The smaller the L-DD, the closer are the actual outcomes to the efficient frontier. It is found that the L-DD in bargaining range is 4.4% in Stage I and 11.43% in Stage II. The L-DD in reaching agreement is 2.37% in Stage I and 8.46% in Stage II. With replicating prior work, the L-DD in reaching agreement task is smaller than in bargaining range task, since subjects can achieve more efficient trade-off in the logrolling process, assisted with the mediation system. The results also reveal that negotiators who make greater concessions to the other party do not place themselves at a disadvantaged position, however, reluctant to make concessions does result in suboptimal outcomes. Literature on social dilemmas assume that actors only focus on their own outcomes. However, the findings reveal that subjects do give some weight to their counterparts. Since negotiation is in essence decision making in value distribution between self and the other, the logrolling outcomes of both self and other are conducted. It is shown that, driven by self-interest motivation, the subjects distribute more value on "Self and less on "Other" than expected. However the difference is not significant, with value distribution on "Self" (F=1.01, P<0.05; T=0.27, P<0.1) and "Other" (F=1.07, P<0.05; T=0.69, P<0.1), respectively. In conclusion, the mediation system is consistent with the logrolling conceptual model and is effective to assist parties to achieve "win-win" settlement.

    Research areas

  • Mediation, Management, Construction contracts