In Mediation Theory, the ‘Nash Equilibrium’ is the stable point at which each Participant’s [‘P’s] chosen strategy (i.e. ‘offer’/’concession’) is the best
response to the other’s, i.e. the point at which neither P can improve
their commercial outcome by ‘unilaterally’ making a change in strategy.
So, in ‘Deal-Making’ Commercial Mediation, the ‘Nash Equilibrium’ is the point at which proposed terms of settlement are ‘enough’, i.e. are ‘sufficient’, to satisfy the underlying needs and priorities of each P.
In other words, the Nash Equilibrium’ = the ‘Price’ to each P of ‘Doing a Deal’ in Commercial Mediation v. potentially costs/risks of Commercial Litigation.
In Commercial Mediation, each P will aim to maximize their own gain, and assume that the other P will do the same. Since the actions of one P directly affect the outcome of the other, this creates a strategic dynamic.
The ‘Nash Equilibrium’ is reached when Participant A’s offer is the best response to Participant B’s offer, and vice versa, i.e. because as rational actors, theoretically neither P will want to move from the commercial ‘Sweet Spot’.
Unlike litigation, ‘Deal-Making’ Commercial Mediation seeks mutual gains.
Therefore, the ‘Equilibrium’ does not involve just just ‘splitting losses’, which is a ‘zero-sum game’, but instead finding the ‘point’ at which both P’s can obtain a better overall outcome when compared to the costs/risks of litigation, which is a ‘non-zero-sum game’.
To facilitate the exploration of where a commercial ‘Sweet-Spot’ may exist, a
‘Deal-Making’ Commercial Mediator can guide, i.e. ‘steer’ the P’s towards the
point of ‘Equilibrium’, i.e. where the P’s ‘offers’ and ‘counter-offers’
converge on a mutually acceptable agreement.
This point of ‘convergence’ is known as the ‘Nash Bargaining Solution’.
‘Deal-Making’ Commercial Mediators manage information flow, in order to help the P’s see the ‘big picture’, encouraging rational moves towards the ‘Equilibrium’ rather than sticking to entrenched positions.
While a true ‘Nash Equilibrium’ is stable, a ‘Deal-Making’ Commercial Mediator must ensure that the ‘outcome’ is not forced upon a P by any ‘power imbalance’.
So, a skilled ‘Deal-Making’ Commercial Mediator will help the P’s to see that
‘collaborative equilibrium’ is better than the costs and risks of litigation –
i.e. to discover for themselves, what I describe in my book, the 2nd Edition of the Contentious Probate Handbook (published by the Law Society in 2025) as a – potential ‘Deal-Making Zone’ or ‘DMZ’ for short.
See also the ‘Commercial Mediation of Music & Performers’ Rights Disputes’ page at www.carlislam.co.uk, which also contains a link to my articles about
Commercial Mediation published in the Law Society Guardian Gazette.
Notes added:
My Q. to AI – ‘Theoretically is there a Nash Equilibrium in the Mediation of a claim for the return of Cultural Heritage?’
AI – ‘In theory, a Nash equilibrium can exist in the mediation of a claim for the return of cultural heritage, but its presence and nature depend entirely on the specific conditions, preferences, and potential outcomes defined within the game theory model.
The mediation of a cultural heritage claim must be modelled as a game. Players might include the claimant nation, the holding institution/nation, and the mediator. Strategies could involve demanding full return, offering partial return, negotiating a loan agreement, or refusing to negotiate.
The outcome depends heavily on subjective factors that are difficult to quantify, such as:
- “Payoffs” (Utility): How each side values the object. The claimant might value the artifact for national identity (high utility), while the holder might value it for museum attendance/research (different high utility).
- ** BATNA (Best Alternative to a Negotiated Agreement): What happens if mediation fails? The claimant might pursue legal action or public campaigns, while the holder might simply retain the object, facing potential reputational damage.
- Reputational Costs: The “soft power” implications and public image concerns for all parties are significant and hard to model with precision .
Potential Scenarios for Equilibrium
- Status Quo Equilibrium: If the holder faces minimal legal pressure and the claimant lacks effective leverage, the most stable outcome (Nash equilibrium) might be a perpetual stalemate where the item remains with the current holder, and both sides continue their current, non-negotiating strategies.
- Compromise Equilibrium: If both sides highly value a positive relationship and face significant reputational damage from a breakdown in talks, a compromise (e.g., long-term loan, joint ownership, or rotation) could become a stable equilibrium where neither party could unilaterally do better by demanding more.
- Mediator’s Role: A skilled mediator can alter the “payoff structure” by highlighting shared interests or the costs of intransigence, potentially moving the parties from a “status quo” equilibrium to a more cooperative one.
While an equilibrium is theoretically possible in any well-defined game, the complex, value-laden nature of cultural heritage disputes makes predicting or guaranteeing a specific Nash equilibrium in a real-world scenario extremely challenging.
So, instead of adopting a ‘deal-making approach’, a Mediator in a Cultural Heritage dispute can facilitate the ‘striking of a balance’ between the P’s apparently irreconcilable polar claims and positions, by steering them away from a ‘Rights and Power’ based discourse, and toward the joint exploration of a multi-faceted solution, which is based upon ‘shared interests’ and their ‘relationship’.