Adapted from “Is Your Lawyer Overconfident, Too?” First published in the Negotiation newsletter.
Parties in litigation are often overly optimistic about their chances of winning in court. This tendency reduces the bargaining range for settlement because one or both parties perceive their walkaway alternative (namely, letting the courts decide) to be more attractive than it actually is. According to conventional wisdom, lawyers can help their clients overcome this overoptimism bias by providing an objective assessment of a case’s merits and encourage acceptance of a deal.
Professor Oren Bar-Gill of New York University School of Law challenges this view with an evolutionary model of the settlement process between lawyers. He points out that optimistic lawyers can more credibly threaten costly litigation than pessimistic lawyers (because they actually believe the threat), thereby more successfully extracting favorable settlements on behalf of their clients.
Yet excessively optimistic lawyers will fail to settle, resulting in litigation that will, over time, expose their overoptimism (because they will lose more often than expected). In Bar-Gill’s model, optimal lawyers are “cautiously optimistic”—not excessively so or unrealistic about the odds of winning in court. Over time, all lawyers will become cautiously optimistic—or be weeded from the marketplace of attorneys.
Bar-Gill suggests that lawyers may succumb to the same overoptimism bias as their clients. The lesson: Don’t assume your lawyer is providing a completely objective assessment of the case. He may be wearing rose-colored glasses, too.