gray-large.pngIn November 2007 while still living in China, I published an article in the Ningbo Guide titled Game Theory and Guanxi. Guanxi may be translated to mean personal connections. But a straight definition is illusive for many reasons not the least of which is that Western society is based largely on the individual whereas Eastern society is based largely based on the group.

At any rate, in my page long article, I sought to explain some of the concepts that I had recently gleaned from reading Zoology Ph.D. Matt Ridley’s The Origin of Virtue. Below is the stab I took at explaining Game Theory within the context of perhaps its most classic construct – Prisoner’s Dilemma:

OK, consider what might happen if both of two parties involved in a grand theft are apprehended. Questioned separately, each is confronted with the choice to divulge the story or not. If neither speaks, authorities will not have enough evidence to convict either one of them. And if they both speak, each will be convicted for 4 years. But here’s the catch: if only one speaks and the other remains quiet, the one that speaks will go to jail for 2 years whereas the one that doesn’t will go to jail for 5. So, what happens? Almost without fail, both ‘defect’ and both go to jail for 4 years.

Why? The reason is that not only does each prisoner consider his own option; he also considers that of his co-conspirator. Here each recognizes that the other will very likely ‘defect’ and leave him to rot in jail for 5 years as the ‘sucker’ if he doesn’t speak up. Should each prisoner go for broke? Bet it all based on ‘honor among thieves’? Of course not, based on the parameters of this particular game of Prisoners’ Dilemma, there is both a positive and negative hedge whereby the individual that speaks will have to go to jail only for 2 or 4 years. As a result, both confess.

As an aside, while each prisoner does not have to serve the maximum of 5 years, society also gains. Notice that the total number of prison years is 8 instead of the 7 provided if only one speaks (i.e. the respective 2 and 5 years added together).

However, Ridley points out in Virtue that the analysis changes considerably if this is not a ‘one-off event’ and is instead one in a series. My write up of the analysis was then as follows:

[W]hen games of Prisoners’ Dilemma are played more than once … by pitting rational, unfeeling computers against one another they will actually begin to cooperate. Basically, acting together cooperatively makes more sense than to go for a quick win in an act that likely will subsequently create mistrust and defection in the opposing computer.

Notably, under these conditions, the computer program that initially came out on top against all other strategies was Tit-for-Tat. In other words, if its counterpart cooperated, Tit-for-Tat in a subsequent encounter would also cooperate, whereas it punished defection with defection. To be truthful though, this stragegy was overcome by a slight derivation called Generous Tit-for-Tat which ‘forgave’ defection about a third of the time. In this way, a mistake driving a never ending Tit-for-Tat cycle might be stopped. (Emphasis added.)

The takeaway that I get from this within the context of a highly charged settlement negotiations in which a Tit-for-Tat ‘death spiral’ has probably already befallen the neighboring parties is that one needs to very carefully take into consideration the position of the opposing party and seek to harmonize it to the best degree possible with one’s own.

Adding to this, as legal counsel, I believe it is our duty to seek to leave the situation at a better state. One which actually seeks to sever the Tit-for-Tat ‘death spiral.’ Below is language which I recently drafted for a settlement which was adopted in full by the – well represented – opposing parties (“owners”) and my own.

Notably, as with so many other boundary disputes, sorting out the property line was almost an incidental component. Of primary concern was identifying how these neighbors, who by the very fact that they live adjacent to each other, will subsequently interact.

Here’s the promised language:

Future complaints will be expressed by either owners to the other owners in signature return-receipt, certified mailing. The opposing owners shall then have the option of refraining from such activity or forwarding the letter to the arbiter within 14 days of receipt. The arbiter shall collect and charge the complaining owners a fee of $200 for receipt of the complaint. If after 21 days of receipt, the complaining owner feels that there has been an inadequate address to the issue, the complaining owners may send a copy of the original letter along with any evidence indicating that the problem has not ceased. The cost for this complaint will still be $200 and be borne by the complaining owners. If during a span of 180 days there is a difference of more than three (3) incidental complaints presented to the arbiter, either party may accelerate the commencement of the arbitration proceedings. Unless the arbiter independently deems that the complaint is sufficiently significant to accelerate arbitration, arbitrations will not occur any greater than every 180 days.

OK, so what are the ins and outs of all this. Basically, at some point we can anticipate that the owners will have issues with the other. The question becomes: Is the issue legitimate or not?

If the issue is illegitimate, then the ‘offending owners’ have the right to forward the issue along to the arbiter at the ‘complaining owners’ expense. Of course, the ‘offending owners’ might consider it easier to “go along to get along” instead.

If the issue is legitimate, then the there are again two options: (a) the offending owner will stop; or (b) the offending owner will not. This then triggers an opportunity for the ‘complaining owners’ to send the complaint to the arbiter.

Additionally, the language seeks to damp down any ‘spaming’ of illegitimate complaints while at the same time allowing for the accelerated recognition of numerous legitimate complaints. This is why a disparity of three allows either party to accelarate the otherwise only available bi-annual arbitrations.

Finally, the arbitrator is given the opportunity to independently bring in the parties if the arbitrator deems the complaint(s) to be severe instead of petty.

Will this experiment work? I don’t know. But for the sake of all parties involved I hope that it does damp further Tit-for-Tat behavior and serves to create ‘pseudo-forgiveness’ and ‘pseudo-calm’ because regardless of any pseudonym given, I think that this language will create peace. Even if it is one that is rather cool … if not forever cold.gray-small.png