Decision making in civil disputes: The effects of legal role, frame, and perceived chance of winning

Judgment and Decision Making, Vol. 3, No. 7, October 2008, pp. 512–527
Decision making in civil disputes: The effects of legal role, frame,
and perceived chance of winning
Victoria Gilliland?and John C. Dunn
School of Psychology
University of Adelaide
Abstract
The present study investigates the effect of framing and legal role on the propensity to accept a settlement offer by
litigants in a simulated legal dispute. Participants were given four different scenarios that factorially combined legal
role (plaintiff vs. defendant) and frame (positive vs. negative). The results indicated that positively framed litigants were
more willing to settle than negatively framed litigants independently of legal role. These results were replicated in a
second experiment that also asked participants to state their subjective probability of winning. This revealed that the
propensity to settle was a joint function of frame and the perceived chance of winning. In contrast to previous research,
no systematic effect of legal role was found. It is concluded that the rate of negotiated settlements of legal disputes may
be increased by manipulating both of these factors.
Keywords: Prospect theory, framing, legal decision making, negotiation, role, plaintiff, defendant
1 Introduction
In order to increase the chance of a negotiated out-
come, there must ?rst be some understanding of why
Litigation is expensive, particularly when the dispute
negotiations fail. Early research that focused on legal
continues until the trial stage. Although ?gures are often
settings attempted to explain litigant behavior through
shrouded in politics and exaggeration, there is evidence
the application of economic utility models (Gould, 1973;
that the cost of litigation has been steadily rising by ap-
Posner, 1973; Shavell, 1982), a theoretical orientation
proximately 12% annually since 1980 (Luu, 1993). More
that has been favored by at least some legal practition-
recent ?gures suggest that nearly 90% of U.S. businesses
ers (Cooter & Rubin?eld, 1989). Consistent with this,
are involved in litigation, with corporations engaged in an
U.S. Federal Court Judge Randall Rader proposed that
average of 37 lawsuits at any one time (Insurance Journal,
litigants determine the value of a lawsuit by multiplying
2005). Furthermore, while only one in twenty civil dis-
the probability of winning in court by the amount they are
putes reach court, trials account for 50% of all spending
likely to win and then subtracting the legal costs (Rader,
on litigation (Trubek, Sarat, Felstiner, Kritzer, & Gross-
2000). Based on this calculation, a settlement offer is ac-
man, 1983). The considerable cost imbalance which ex-
cepted if it is higher than the this value. By this account,
ists between disputes resolved at trial and through set-
negotiations fail due to differing estimates of the proba-
tlement means that a small reduction in the number of
bility of winning at trial by plaintiffs and defendants.
disputes which go to trial can result in a large reduction
in the overall cost of litigation. There is therefore signif-
1.1 Cognitive processes in dispute negotia-
icant bene?t to be gained from reducing the number of
tion
civil disputes which reach the trial stage. In the case of
non-legal disputes, such as those involving acts of terror-
As is well known, economic utility models fail to take
ism or inter-state con?ict, the consequences of failed ne-
into account the nature of the cognitive processes that in-
gotiation go beyond mere dollars and cents with people’s
tervene in decision making. It is for this reason that atten-
lives also in the balance.
tion has focused on how individuals represent the facts of
?This research was conducted by the ?rst author as part of her under-
the dispute, the probabilities of different outcomes, and
graduate and postgraduate studies at the University of Adelaide under
the nature and value of what is at stake.
the supervision of the second author. This research was also supported
Several studies have attempted to account for the fail-
by an Australian Research Council Grant (DP0558407) awarded to the
ure of negotiations in terms of the different ways in which
second author. Corresponding author: Dr John C. Dunn, School of Psy-
chology, University of Adelaide, North Terrace, SA, 5005, Australia.
plaintiffs and defendants may represent the facts of the
Email: john.c.dunn@adelaide.edu.au
case (e.g., Korobkin & Guthrie, 1994; Rachlinski, 1996;
512

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
513
Figure 2: Evaluation of outcomes from two reference
points, A and B. Outcomes are evaluated as losses rel-
ative to A but are evaluated as gains relative to B.
outcome that 400 people will die against the risky out-
Figure 1: Hypothetical value function illustrating the ef-
come of 1/3 probability that no one will die and 2/3 prob-
fect of framing. For gains, expressed as the number of
ability that everyone will die. In this case, they found that
lives saved, the value of the certain outcome, v(200) is
the majority of participants preferred the risky outcome.
greater than expected value of the gamble, 2 · v(0) + 1 ·
3
3
Tversky and Kahneman explained the effect of framing
v(600). For losses, expressed as the number of lives lost,
in terms of a non-linear subjective value function that is
the opposite is true.
monotonic and concave for gains (lives saved) and mono-
tonic and convex for losses (lives lost) as illustrated in
van Koppen, 1990). Such studies have focused on the ef-
Figure 1. Because of the properties of this function, the
fect of framing on decision making. Introduced by Kah-
value of a certain gain, v(200), is greater than the value of
neman and Tversky (1979), framing refers to alternative
a gamble of equal expected utility, 2/3.v(0) + 1/3.v(600).
evaluations of outcomes in terms of either gains or losses
For the same reason, the value of a certain loss is less than
from a given reference point which, in turn, in?uences
the value of a gamble of equal expected utility.
an individual’s risk preferences. Decisions made in the
Although de?ned in terms of the expected value of
context of gains are said to be positively framed and are
the gamble, this is not the comparison that people ac-
generally characterized by risk aversion — that is, by a
tually make. According to prospect theory (Kahneman
preference for a certain outcome over a gamble of equal
& Tversky, 1979), subjective probabilities also undergo a
expected utility. In contrast, decisions made in the con-
non-linear transformation via a weighting function, w(p).
text of losses are said to be negatively framed and are
Called decision weights in order to distinguish them from
characterized by risk seeking behavior, illustrated by the
true probabilities, they are assumed to be used to generate
rejection of a certain outcome in favor of a gamble with
the subjective value of the two choices. Thus, for gains,
equal expected utility (Kahneman & Tversky, 1983).
the perceived value of the certain outcome for the Asian
Tversky and Kahneman (1981) illustrated the effect
disease problem is equal to w(1) · v(200), while the per-
of framing with the “Asian disease” problem. In this
ceived value of the gamble is equal to w( 2 )·v(0)+w( 1 )·
3
3
problem, participants are told to imagine that the U.S. is
v(600). If the former is greater than the latter, then the
preparing for the outbreak of an unusual Asian disease,
person should be risk averse and prefer the certain out-
which is expected to kill 600 people. They are then pre-
come to the gamble.
sented with a choice between two alternative programs
A critical aspect of framing concerns the ability to eval-
framed either positively or negatively. In the positive
uate prospects from different reference points. This is il-
frame, participants were given the choice was between
lustrated in Figure 2, which demonstrates a hypothetical
the certain outcome that 200 people will be saved and a
timeline in relation to the Asian disease problem. The
risky outcome of 1/3 probability that 600 people will be
timeline involves two events, here labeled incident and
saved and 2/3 probability that no people will be saved.
prospect. The incident corresponds to the information
In this condition, Tversky and Kahneman found that the
that 600 lives are expected to be lost. The prospect cor-
majority of participants preferred the certain outcome.
responds to the information that there are two treatment
Framed negatively, the choice was between the certain
programs each with a particular outcome structure. Dif-

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
514
Figure 3: Plaintiff’s evaluation of outcomes from two ref-
Figure 4: Defendant’s evaluation of outcomes from two
erence points, A and B. Outcomes are evaluated as losses
reference points, A and B. Outcomes are evaluated as
relative to A but are evaluated as gains relative to B.
gains relative to A but are evaluated as losses relative to
B.
ferential framing of this problem corresponds to a shift
between two reference points, labeled A and B. Point
comes are evaluated as gains while relative to B, they are
A corresponds to the state of affairs before the incident,
evaluated as losses.
while point B corresponds to the state of affairs after the
incident. Relative to A, the set of outcomes are evalu-
1.1.1 Effects of framing on litigation
ated as losses while relative to B, the same outcomes are
evaluated as gains.
Prior research investigating the effect of framing on lit-
The structure illustrated in Figure 2 may be readily ex-
igation outcomes has focused on the proposition that
tended to a litigated dispute. This is shown in Figure 3
plaintiffs and defendants tend to adopt positive and neg-
and corresponds to the hypothetical scenario which we
ative frames, respectively, and that this determines their
used in the two experiments to be described later. It il-
different propensities to settle. In one of the ?rst studies
lustrates the set of events that confront the plaintiff or
to examine this question, van Koppen (1990) presented
aggrieved party in the dispute. In this case, the incident
participants with two hypothetical scenarios involving the
corresponds to information that the plaintiff has lost some
purchase of a puppy. In the plaintiff scenario, participants
amount of money (in the present scenario, this is equal to
were told that shortly after they had paid for the puppy, it
$20,000). The prospect corresponds to a choice between
had died from a congenital defect and that they were now
a settlement offer of $10,000 (the certain outcome) and
suing the breeder for a refund. In the defendant scenario,
the gamble associated with going to court. This is pre-
the puppy had died prior to the payment being ?nalized
sented as a 50% chance of receiving $20,000 if they win
and they were now being sued by the breeder for this pay-
at trial and a 50% chance of receiving nothing if they lose
ment. Although not made explicit, van Koppen assumed
at trial. However, as in the Asian disease problem, the
that both plaintiffs and defendants would evaluate their
plaintiff may evaluate this prospect relative to two differ-
options from a post-incident reference point, correspond-
ent reference points. Relative to point A, the outcomes
ing to B in Figures 3 and 4, and that, as a consequence,
are evaluated as losses while relative to point B, they are
plaintiffs would be in a positive or gain frame, while de-
evaluated as gains.
fendants would be in a negative or loss frame. In two of
Figure 4 presents the same scenario, this time from the
four experiments, van Koppen found the expected result;
defendant’s point of view. In this case, the incident cor-
plaintiffs tended to be risk averse and prepared to accept
responds to information that the defendant has acquired
a relatively low fraction of the amount in dispute while
the equivalent of $20,000 (the legitimacy of which is dis-
defendants tended to be more risk taking and prepared to
puted by the plaintiff), and the prospect corresponds to
pay only a similarly low fraction of the disputed amount.
a choice between a settlement offer of $10,000 and the
Although van Koppen found some results consistent
gamble of going to court which entails a 50% chance of
with the hypothesis that plaintiffs tend to be risk averse
paying $20,000 if they lose and a 50% chance of paying
and defendants risk seeking, the objective facts of the
nothing if they win. Yet the defendant may evaluate this
case varied between the two scenarios, so it is not possi-
prospect with respect to the same two reference points as
ble to attribute the observed differences entirely to fram-
the plaintiff. In this case, however, relative to A, the out-
ing. In a later study, Rachlinski (1996; Experiment 1)

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
515
replicated the main result found by van Koppen using
viewed as buyers of that right, is clear.
a scenario that was closer in form to the Asian disease
Neale et al. (1987) investigated the effect of frame and
problem. Participants were presented with the same legal
role by comparing two price negotiation conditions. In
dispute from either the plaintiff’s or defendant’s point of
the role present condition, participants were assigned the
view. They were then asked to choose between two op-
role of either buyer or seller and instructed to agree upon
tions; accepting a ?xed settlement or going to trial with an
a price mix of negotiable commodities that included dis-
equivalent expected outcome. For example, in one sce-
count terms, delivery time, and ?nancing terms. In the
nario the amount in dispute was $100,000 and the two
role absent condition, negotiators were assigned mean-
alternatives were either to accept a settlement offer of
ingless roles (“Phrablies” and “Grizzats”) as were the ne-
$30,000 or to go to trial where there was a 30% chance of
gotiable commodities, relabelled “slatkins,” “drigglers”
winning and receiving $100,000 and a 70% chance of los-
and “?nmals.” In all other respects the two conditions
ing and receiving effectively nothing. Overall, the results
were identical. Frame was manipulated by presenting the
were consistent with differential framing of plaintiffs and
value of the negotiable commodities in terms of pro?ts
defendants with 82% of plaintiffs choosing to settle com-
(positive frame) or in terms of expenses (negative frame).
pared with only 45% of defendants.
In the role absent condition, there was an effect of frame
Both van Koppen (1990) and Rachlinski (1996) pre-
but no effect of role. Negotiators in a positive frame were
sented positively framed scenarios to plaintiffs and neg-
relatively risk averse and completed more transactions
atively framed scenarios to defendants. While the re-
at a lower average pro?t than negotiators in a negative
sults they found are consistent with the effects of fram-
frame. In the role present condition, similar results were
ing, they may also be attributed to effects of the differ-
found only for number of transactions completed. How-
ent legal roles. A potential effect of role has been high-
ever, in this condition, buyers generated more pro?t per
lighted in a series of studies of two-party price nego-
transaction than sellers and for both roles there was no
tiations conducted by Neale, Bazerman and colleagues
effect of frame. This result suggests that adopting a so-
(Blount, Thomas-Hunt, & Neale, 1996; Neale & Baz-
cially de?ned role may affect negotiation behaviour in-
erman, 1985; Neale, Huber, & Northcraft, 1987). In
dependently of frame. To the extent that similar factors
two-party price negotiation, two parties identify a mutu-
may be at work in litigation, it suggests that the effect
ally satisfactory settlement agreement for the exchange
on decision making of being a plaintiff or defendant may
of goods and services. These types of transactions, such
be independent of the different ways of framing the out-
as buying a car, occur daily and form the foundation of
comes.
a market economy. Transactions of this nature are also
In order to distinguish the effects of role and frame,
structurally similar to litigious negotiations in which two
it is necessary to vary frame for both plaintiffs and de-
parties negotiate over the value (i.e. the proposed settle-
fendants. One previous study by Korobkin and Guthrie
ment) that should be assigned to a given legal infraction.
(1994) attempted to do this for plaintiffs. In this study,
In the context of price negotiation research, “role”
participants were told that they had been involved in a
refers to the assignment of an individual to be either a
motor vehicle accident in which they had sustained dam-
buyer or a seller. Numerous studies have found that in
ages worth $28,000 and that according to their lawyer
power-balanced (symmetrical) negotiations, where role is
they would receive either $10,000 or $28,000 at trial, de-
an arbitrary assignment, buyers consistently outperform
pending on how the judge interpreted a clause in the rele-
sellers. That is, buyers complete transactions of greater
vant insurance policy. They were also told that the defen-
average value than sellers (see for example Bazerman,
dant (the insurance company) had made a ?nal offer of
Magliozzi, & Neale, 1985; Neale & Bazerman, 1985;
$21,000, and were asked to indicate whether they would
Neale et al., 1987). To explain this, Neale et al. (1987)
accept such an offer. Participants were then given further
suggested that adopting a role induced a re-framing of
information that placed them into either a positive or neg-
the stakes. On this view, sellers tend to adopt a positive
ative frame. In the positive frame, participants were told
frame since they stand to gain something of determinate
that their total damages consisted of $14,000 in medical
value (money) from the transaction while buyers tend to
bills that had already been paid by their health insurance
adopt a negative frame since they stand to lose the same
fund and a further $14,000 corresponding to the value of
amount. Sellers therefore will tend to be risk averse and
their motor vehicle. In the negative frame, participants
prepared to enter into a transaction for a lower amount
were told that their total damages consisted of $4,000 in
than the objective value of the item in question. Simi-
medical bills that had already been paid by their health in-
larly, buyers will tend to be relatively risk seeking and
surance fund and a further $24,000 corresponding to the
less prepared to pay more than the objective value of the
value of their motor vehicle. Faced with these alterna-
item. The parallel with plaintiffs, who may be viewed as
tives, Korobkin and Guthrie found that 90% of positively
sellers of their right to sue, and defendants who may be
framed plaintiffs would either probably or de?nitely ac-

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
516
only be because some proportion of participants chose
to evaluate the prospect from the pre-incident point A.
The problem is that there is nothing in the scenario which
would suggest that they should do this and, if they were
to do so, it would contradict the interpretation offered by
both van Koppen (1990) and Rachlinski (1996) of their
results for which they assumed that plaintiffs would eval-
uate the prospect from the post-incident point B (or C).
Furthermore, it is also apparent that from any of the three
reference points, the values of the outcomes differed be-
tween the two framing conditions. It is therefore dif?cult
to attribute the results to the effect of framing alone.
1.1.2 The present study
Studies of the effect of framing on litigation have not yet
satisfactorily resolved two questions. The ?rst concerns
the issue of whether plaintiffs and defendants are bound
by the role they play to adopt a positive and negative
frame, respectively, or whether they can be induced to
adopt alternative frames. In terms of the structures shown
in Figures 3 and 4, this question asks whether it is possi-
ble for litigants to alter their point of reference from the
post-incident point B to the pre-incident point A. The sec-
ond question concerns whether the effect of legal role is
Figure 5: Outcome structures used by Korobkin &
completely reducible to an effect of framing or whether,
Guthrie (1994). (a) Positive or gain frame. (b) Negative
as suggested by the results of Neale et al. (1987), the ex-
or loss frame.
plicit roles of plaintiff and defendant affect decision mak-
ing independently of how the dispute is framed.
cept the offer, while only 64% of the negatively framed
In the present study, participants received a question-
plaintiffs responded in the same way.1
naire containing four different legal scenarios each of
Although Korobkin and Guthrie concluded that fram-
which dealt with a civil dispute over the sum of $20,000.
ing can alter a plaintiff’s propensity to settle, their re-
Each scenario was presented in one of four forms de?ned
sults are not easily interpreted for two reasons. First, for
by the factorial combination of legal role, plaintiff vs. de-
both frames, the reference point is ambiguous and, sec-
fendant, and frame, positive vs. negative. For plaintiffs,
ond, from any reference point, the nature of the outcomes
positively framed scenarios described potential outcomes
objectively differs between frames. Figure 5 presents the
in terms of gains relative to the situation following the
structures of the positive and negative frames used by Ko-
initial loss of income, corresponding to point B in Figure
robkin and Guthrie (1994) in the same form as shown in
3. Negatively framed scenarios, on the other hand, de-
Figures 2 to 4. It is apparent that, unlike the Asian disease
scribed potential outcomes in terms of losses relative to
problem, the scenarios used by Korobkin and Guthrie cre-
the situation that would have been obtained had the ini-
ate three events on the timeline. These are de?ned by
tial loss of income not occurred, corresponding to point A
the incident, corresponding to the total damages incurred
in Figure 3. For defendants, positively framed scenarios
through the accident, initial recompense of medical bills,
described potential outcomes in terms of gains relative to
and the ?nal prospect. As a result, there are three distinct
the situation that would have been obtained had the initial
reference points, A, B, and C, and only from point A
increase in income not occurred, corresponding to point
do the outcomes of the prospect differ between the two
A in Figure 4. Negatively framed scenarios described po-
frames. This means that if the difference in settlement
tential outcomes in terms of losses relative to the situation
rates is to be attributed to the difference in framing, it can
following the increase in income, corresponding to point
B in Figure 4. In each scenario, participants were told
1Similar results were reported for the other two scenarios which
that a single settlement offer of $10,000 was on the table.
were presented in the same study. These involved a property dispute
They were also told that if this offer was rejected and the
with a neighbour and a child custody dispute between parents. The
framing manipulations followed a similar pattern to that of the motor
case went to trial, there was a 50% chance of either being
vehicle accident.
awarded or having to pay the entire sum of $20,000 and a

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
517
50% chance of being awarded or having to pay nothing.
of $10,000 had been made and they were asked if they
Participants read each scenario in turn and were asked
would be prepared to accept it.
if they would accept or reject the settlement offer. We
Each scenario established the relevant legal role by
expected to ?nd an effect of both role and frame on the
means of an initial statement of the form: “You are the
decision to settle, however the size of these effects and
plaintiff/defendant in a litigation suit. . . ” The relevant
the nature of their interaction was unknown.
frame was established through alternative wording of the
trial outcomes and the offer. For example, in the ?rst sce-
nario, the trial outcome in the P+ condition is described
2 Experiment 1
as follows,
“Your lawyer has estimated that you have a 50%
2.1 Method
chance that the judge will rule in your favor and your
will receive $20,000 in compensation and a 50% chance
2.1.1 Participants
that the judge will rule against you and you will receive
The participants were 170 psychology students at the
nothing in compensation”
University of Adelaide who received course credit for
Similarly, the settlement offer in this condition is de-
their participation. They were aged between 17 and 44
scribed in the following way,
(M = 19.5, SD = 3.7) and were randomly assigned to one
“If you accept this offer, you will receive $10,000 in
of four groups.
compensation”
In the D– condition, the phrase, “receive . . . in com-
pensation”, was replaced by the phrase “pay . . . in com-
2.1.2 Materials
pensation”. In the P– condition, this phrase was replaced
Participants completed a questionnaire consisting of four
by the phrase, “lose . . . in income”, while in the D+ con-
legal scenarios. (Excerpts are in the Appendix, in the ver-
dition, it was replaced by the phrase, “keep . . . in new
sions used in Experiment 2.) Each scenario was presented
income”.
in one of four test conditions de?ned by the factorial com-
bination of role (plaintiff or defendant) and frame (posi-
2.1.3 Design and Procedure
tive or negative). Thus, each scenario could be presented
to participants either as a positively framed plaintiff (P+),
Participants were randomly allocated to one of four
a negatively framed plaintiff (P–), a positively framed de-
groups corresponding to the version of the questionnaire
fendant (D+) or a negatively framed defendant (D–). The
they received. They were asked to read and respond to all
assignment of scenarios to each role/frame combination
four scenarios in the order in which they were presented.
was counterbalanced across four different versions of the
They were instructed to consider each scenario separately
questionnaire. In each version, the four scenarios were
and to make their decision solely on the basis of the de-
always presented in the same order. In version 1, the or-
tails provided, without regard to legal fees or court costs.
der of conditions was P+, P–, D–, D+. The order was D–,
They were also asked not to view the scenarios as moral
D+, P+, P– in version 2, P–, D–, D+, P+ in version 3, and
dilemmas, as both plaintiffs and defendants would feel
D+, P+, P–, D– in version 4.
that their position was correct.
Each scenario outlined the facts of a legal dispute
which could plausibly be presented in both positive and
2.2 Results
negative frames for both the plaintiff and the defendant.
The ?rst scenario involved a defamation claim between a
Figure 6 shows the overall proportion of accepted settle-
shop owner and a newspaper. The second scenario out-
ments averaged over scenario as a function of legal role
lined a property dispute between an investor and a bed-
and frame. The data were analyzed using logistic regres-
and-breakfast operator. The third scenario was a contrac-
sion in which each response was treated as an indepen-
tual dispute between two business partners regarding en-
dent observation.2 This analysis revealed a signi?cant ef-
titlement to income. The fourth scenario described an
fect of frame, ?2(1) = 54.18, p < 0.0001, with litigants in
inheritance dispute between two cousins. In each case, it
a positive frame being more likely to settle than litigants
was stated that the plaintiff was suing the defendant for
in a negative frame, whether they were a plaintiff or a de-
$20,000, and that the chance of winning at trial was 50%.
fendant. There was no overall effect of either scenario,
If the plaintiff won at trial then the defendant would have
?2(3) = 2.46, p = 0.482, or role, ?2(1) = 3.49, p = 0.062,
to pay the full $20,000. Alternatively, if the plaintiff lost
and none of the interactions between frame and any other
at trial then the defendant would have to pay nothing. For
2Results did not differ when participants were included as
simplicity, there were no legal costs associated with the
a random effect.
Data are available with this article at
case. Each participant was told that a settlement offer
http://journal.sjdm.org/vol3.7.html (or mirrors).

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
518
tween losses, were more risk taking — they were less
likely to accept the settlement offer and more likely to go
to trial. While this ?nding is broadly consistent with pre-
vious research (for example Korobkin & Guthrie, 1994;
Rachlinski, 1996; van Koppen, 1990), this is the ?rst
demonstration of an effect of framing that is independent
of role while holding the objective facts of the case con-
stant.
As well as being consistent across all four scenarios,
the effect of frame was also substantial, with the overall
proportion of acceptances increasing from 0.46 for liti-
gants in a negative frame to 0.74 for litigants in a positive
frame. This demonstrates that it is possible to induce a
considerable change in the behavior of both plaintiffs and
defendants by manipulating how each frames the dispute.
This is consistent with the ?nding in other ?elds of nego-
Figure 6: Proportion of settlement acceptances as a func-
tiation that framing could play a role in both the exacer-
tion of legal role (plaintiff vs. defendant) and frame (pos-
bation or resolution of con?ict (see for example Neale &
itive vs. negative) averaged across scenarios in Experi-
Bazerman, 1992).
ment 1. The probability of settlement was 0.77 and 0.49
The second main result is that the effect of legal role
for plaintiffs in a positive and negative frame, respec-
on the decision to settle was independent of the effect
tively. For defendants in positive and negative frames, the
of frame. This is inconsistent with the view that plain-
probability of settlement was 0.70 and 0.43, respectively.
tiffs are always more risk averse than defendants and thus
more likely to settle (e.g., van Koppen, 1990; Rachlinski,
1996).
variable was signi?cant (all p’s greater than 0.1). How-
The third main result was unexpected. Although there
ever, we did ?nd an unexpected interaction between role
was little or no overall difference between plaintiffs and
and scenario, ?2(3) = 35.81, p < 0.0001.
defendants in their propensity to settle, the effect of le-
The interaction between legal role and scenario is
gal role varied considerably between the different scenar-
shown in Figure 7 which plots the proportion of ac-
ios. In fact, in marked contrast to the view that plain-
cepted settlements as a function of legal role and frame
tiffs are always more risk averse than defendants, the
separately for each scenario.
Analysis of each sce-
results for Scenario 3 showed that it is possible, under
nario revealed a signi?cant effect of role in Scenario 1,
some circumstances, for plaintiffs to be less likely to set-
?2(1) = 4.20, p = 0.040, with plaintiffs more likely to
tle than defendants, independently of how they frame the
settle than defendants; a non-signi?cant effect in Sce-
dispute. A super?cially similar result was reported by
nario 2, ?2(1) = 0.004; a signi?cant effect in Scenario 3,
Guthrie (2000) who found that defendants were more
?2(1) = 10.82, p = 0.001, with defendants more likely to
willing to settle than plaintiffs in “frivolous” litigation,
settle than plaintiffs; and a signi?cant effect in Scenario 4,
in which plaintiffs have little or no chance of winning at
?2(1) = 24.20, p < 0.0001, with plaintiffs more likely to
trial. In this case, according to prospect theory, plain-
settle than defendants. The effect of frame was signi?cant
tiffs over-weight their small probability of winning while
in all four scenarios and the interaction between role and
defendants under-weight their high probability of win-
frame was signi?cant only in Scenario 4, ?2(1) = 5.15,
ning, leading to a preference inversion. However, this
p < 0.023.
mechanism does not directly explain the present results
Experiment 1 revealed three main results. First, con-
since both plaintiffs and defendants were told that they
sistent with prospect theory, the decision to settle a sim-
had equal chances of winning at trial.
ulated legal dispute is strongly in?uenced by frame. In
Although the probability of winning at trial was ?xed
all four scenarios, a litigant in a positive frame was more
at 50%, it may have been possible that participants de-
likely to accept the settlement offer than a litigant in a
parted from this amount in estimating their own subjec-
negative frame. When induced to be in a positive frame
tive probability of winning, although not to the extent ex-
and thereby choosing between gains, participants in this
amined by Guthrie (2000). This estimation could have
study were consistently risk averse — that is, they were
been based on the content of each scenario and the par-
more likely to accept the settlement offer (certain out-
ticipants” general knowledge and experience of the law.
come) and less likely to go to trial (uncertain outcome).
If there were systematic differences between scenarios in
Conversely, negatively framed participants, choosing be-
the subjective chance of winning at trial, this would affect

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
519
Figure 7: Proportion of settlement acceptances as a function of legal role and frame for each scenario in Experiment
1.
settlement rates and could account for the variable effect
type B, the question was asked before the request was
of role. Experiment 2 investigated this possibility by ask-
made for the participant to decide to accept or to reject
ing participants to provide estimates of their chance of
the settlement offer3.
winning at trial.
3.1.3 Design and Procedure
3 Experiment 2
Participants were randomly allocated to one of 8 groups
de?ned by the combination of the two types and four ver-
3.1 Method
sions of the questionnaire. Otherwise, the procedure was
identical to that used in Experiment 1.
3.1.1 Participants
The participants in this study were 408 psychology stu-
3.2 Results and Discussion
dents from the University of Adelaide who participated in
order to receive course credit. They were aged between
Figure 8 shows the proportion of accepted settlements av-
16 and 39 (M = 19.6, SD = 4.03) and were randomly as-
eraged over scenario as a function of questionnaire type,
signed to one of 8 groups depending upon the version and
legal role, and frame. The pattern of results is similar to
type of questionnaire they received (see below).
that found in Experiment 1. The data were analyzed us-
ing logistic regression with factors of questionnaire type,
3.1.2 Materials
scenario, role, and frame.4 This revealed a signi?cant
effect of frame, ?2(1) = 64.05, p < 0.0001, and, in con-
This experiment used the same questionnaires containing
trast to Experiment 1, a signi?cant effect of role, ?2(1) =
the same four legal scenarios and instructions as used in
10.55, p = 0.001. The interaction between scenario and
Experiment 1. The only difference was that participants
role was also signi?cant, ?2(3) = 199.62, p < 0.0001, as
were asked the following question:
in Experiment 1. However, unlike in Experiment 1, there
“Your lawyer has advised that you have a 50% chance
was a signi?cant interaction scenario and frame, ?2(1) =
of winning in court. Based on the details provided, what
chance (as a percentage) do YOU think you have of win-
3There were other minor differences between the two types. Type A
ning in court?”
was presented as a paper and pencil questionnaire, as in Experiment 1,
There were four versions of each questionnaire as in
while type B was presented online through a web-based interface. The
Experiment 1. In addition, there were also two types of
two versions also asked different supplementary questions. Of the 408
questionnaire. In type A, the question above was asked
participants, 192 completed a type A questionnaire, and 216 completed
a type B questionnaire.
immediately following the request for the participant to
4Due to the nature of the design it was not possible to examine the
decide whether or not to accept the settlement offer. In
effect of questionnaire version.

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
520
frame (M = 0.488 and M = 0.465, respectively). There
was also a main effect of role, F (1,1600) = 60.39, MSE
= 16742.1, p < 0.0001, with plaintiffs perceiving them-
selves as having a greater chance of losing than defen-
dants (M = 0.509 and M = 0.444, respectively). As Fig-
ure 10 also shows, the interaction between scenario and
role was highly signi?cant, F (3,1600) = 188.85, MSE =
52360.6, p < 0.0001. No other effects were signi?cant.
The present data also show evidence of a self-serving
bias — the propensity for individuals in a given role to
over-estimate their probability of winning at trial. In or-
der to investigate this, the defendant’s subjective proba-
bility of losing was converted into the subjective prob-
ability of winning which corresponds to the defendant’s
subjective probability that the plaintiff should lose. Any
effect of role in the analysis of these data would indi-
Figure 8: Proportion of settlement acceptances as a func-
cate a self-serving bias (or its opposite). Analysis of
tion of questionnaire type (A vs. B), legal role (plaintiff
variance revealed such a main effect, F (1,1600) = 32.0,
vs. defendant), and frame (positive vs. negative) averaged
MSE = 8871.3, p < 0.0001, with plaintiffs estimating
over scenarios in Experiment 2. The probability of the
their chance of losing as being less than that estimated
plaintiff settling was 0.75 and 0.50 for positive and neg-
by defendants (M = 0.509 and M = 0.556, respectively).
ative frames, respectively. The probability of the defen-
There was also a small but signi?cant interaction between
dant settling was 0.63 in the positive frame and 0.49 in
role and frame, F (1,1600) = 7.81, MSE = 2166.1, p <
the negative frame.
0.01, with frame affecting plaintiffs’ perceived chances
of losing (Ms = 0.527 and 0.489 for positive and nega-
tive frames, respectively), while having little or no effect
14.21, p = 0.003. No other main effects or interactions
on defendants’ perceived chance of the plaintiffs losing
were signi?cant.
(Ms = 0.558 and 0.553 for positive and negative frames,
Figure 9 shows the pattern of results for each scenario
respectively).
and reveals the variable effect of role and frame across the
It is clear from a comparison of Figures 9 and 10 that
four scenarios. Separate analyses of questionnaire type,
variability in the effect of role on the probability of ac-
role, and frame for each scenario revealed that the effect
cepting a settlement across scenario is strongly related to
of frame was signi?cant in all four scenarios, ?2(1) =
corresponding variation in the subjective probability of
13.13, 63.12, 7.50, and 9.96, respectively. In each case,
losing at trial. For both plaintiffs and defendants, a high
a positively framed litigant was more likely to settle than
perceived chance of losing at trial is correlated with an in-
a negatively framed litigant. In contrast to Experiment
creased chance of accepting the settlement offer. In order
1, the effect of role was signi?cant (p < 0.02) in all four
to test this hypothesis more formally, the data from Ex-
scenarios, ?2(1) = 61.31, 6.60, 58.72, and 88.34, respec-
periment 2 were re-analyzed using subjective probability
tively. Plaintiffs were more likely than defendants to set-
of losing (or winning) as a covariate. This revealed, as
tle in Scenarios 1 and 4, and less likely to settle in Sce-
expected, that perceived probability of winning is a very
narios 2 and 3. No other effect was signi?cant (p < 0.01)
strong predictor of settlement, ?2(1) = 533.5, p < 0.0001.
in any scenario.
Furthermore, once variation in subjective probability has
Despite being informed that there was always a 50%
been controlled for, the main effect of role is completely
chance of winning at trial, participants provided a wide
eliminated, ?2(1) = 0.03, p = 0.873. In contrast, the effect
range of estimates for what they believed to be the actual
of frame remains signi?cant, ?2(1) = 68.78, p < 0.0001,
chance. Figure 10 shows the average subjective prob-
as is the interaction between frame and scenario, ?2(3) =
ability of losing at trial as a function of questionnaire
11.06, p = 0.011. There is now a signi?cant main effect
type, role, and frame for each scenario. These estimates
of scenario, ?2(3) = 8.67, p = 0.034, and the interaction
covered the full range from zero to one and were ap-
between scenario and role, while much reduced, remains
proximately normally distributed with an overall mean of
statistically signi?cant, ?2(1) = 18.9, p < 0.001.
0.476 and a standard deviation of 0.197. Analysis of vari-
Analysis of the individual scenarios revealed a simi-
ance revealed a main effect of frame, F (1,1600) = 7.81,
lar pattern, with subjective probability highly signi?cant
MSE = 2166.1, p = 0.005, with a positive frame leading to
(p < 0.001) in all scenarios. When the effect of this co-
a greater subjective probability of losing than a negative
variate is removed, the effect of frame remains signi?-

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Judgment and Decision Making, Vol. 3, No. 7, October 2008
Decision making in civil disputes
521
Figure 9: Proportion of settlement acceptances as a function of questionnaire type, legal role, and frame for each
scenario in Experiment 2.
cant (p < 0.01) in three of the four scenarios, ?2(1) =
In other words, they will settle if the perceived value of
14.68, 54.2, 10.37 and 6.58, respectively. The effect of
the settlement offer is greater than the expected value of
role, while still signi?cant (p < 0.01) in two of the four
going to trial. This, in turn, is determined by the weighted
scenarios, was substantially reduced, ?2(1) = 6.65, 0.10,
subjective probability of winning at trial, and losing noth-
9.10 and 4.96, respectively. The interaction between role
ing, and the weighted subjective probability of losing at
and frame is not signi?cant (p < 0.01) in any scenario.
trial and losing the full amount.
In the present study, the objective values of the settle-
3.2.1 The effects of role, frame, and perceived
ment offer, $10,000, and the award, $20,000, were both
chance of losing
?xed. According to prospect theory, the subjective val-
ues of these quantities are therefore also ?xed for a given
It is possible to combine the results of Experiment 2 in a
individual. We assume that these values are also ?xed
single ?gure that demonstrates the effects of role, frame,
across individuals. This means that, after re-arranging the
and perceived chance of winning on the probability of ac-
terms in the above equations5, for an individual in a pos-
cepting the settlement offer. According to prospect the-
itive frame, the settlement offer will be accepted when-
ory, the offer will be accepted if its subjective value is
ever,
greater than the subjective value of going to trial. An
v($10, 000)
w(p) <
= r
individual in a positive frame, whether plaintiff or defen-
v($20, 000)
+
dant, should therefore settle if,
while, for an individual in a negative frame, the offer will
w(1)·v($10, 000) > w(p)·v($20, 000)+w(1?p)·v($0)
be accepted whenever,
where v(.) is a subjective value function that takes a quan-
v(?$10, 000)
w(1 ? p) >
= r?
tity (money in this case) as its argument, and w(.) is a
v(?$20, 000)
weighting function applied to the subjective probability
As Figure 10 shows, the average subjective probability
of winning at trial, p. According to Kahneman and Tver-
of losing at trial varies across the set of conditions de?ned
sky (1979), people tend to assign greater weight or im-
by the levels of role, frame, and scenario. We assume that
portance to probabilities close to zero and relatively less
within each such condition, subjective probability is ap-
importance to probabilities close to one. A similar equa-
proximately normally distributed with a mean and stan-
tion can be written for an individual in a negative frame.
dard deviation corresponding to the observed mean and
In this case, such an individual should settle if,
standard deviation for that condition. We also assume, as
w(1) · v(?$10, 000) > w(p) · v(?$0) + w(1 ? p) ·
5The null term in each equation falls out since, according to prospect
v(?$20, 000)
theory, v(0) = 0. We also assume that w(1) = 1.

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