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ACIArb (Intro to ADR) study materials
ACIArb (Intro to ADR) study resources

ACIArb (Intro to ADR) practice questions

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Question 1Overview of dispute resolution processes and the ADR spectrum

In the standard spectrum of dispute resolution processes, which process is typically placed at the most formal, adjudicative end?

  1. Conciliation assisted by a third party
  2. Litigation in a national court Correct answer.
  3. Mediation facilitated by a neutral third party
  4. Negotiation between the parties directly

Explanation

Litigation is the archetypal formal adjudicative process: a judge imposes a binding decision after a prescribed procedure. The other processes listed are consensual or facilitative and sit further along the spectrum towards party autonomy.

Question 2Overview of dispute resolution processes and the ADR spectrum

Which feature most clearly distinguishes arbitration from mediation?

  1. The parties choose the neutral
  2. The third party has the power to issue a binding decision Correct answer.
  3. The process is always confidential
  4. The process is voluntary at the outset

Explanation

Arbitration is adjudicative: the tribunal decides the dispute and the award is binding and enforceable. Mediation is facilitative: the mediator assists but cannot impose an outcome, so the binding-decision power is the key distinguishing feature.

Question 3Overview of dispute resolution processes and the ADR spectrum

A clause states that 'any dispute shall be referred to a neutral who will assist the parties to reach a settlement but cannot impose a decision.' Which process does this describe?

  1. Arbitration
  2. Mediation Correct answer.
  3. Litigation
  4. Expert determination

Explanation

The defining feature of mediation is that the neutral facilitates settlement without decision-making power. Expert determination and arbitration both involve a third party who decides, and litigation involves a judge who decides.

Question 4Overview of dispute resolution processes and the ADR spectrum

Which statement best describes the position of negotiation on the ADR spectrum?

  1. It requires a neutral third party to be present
  2. It is a form of adjudication
  3. It is the most party-controlled process, with no neutral third party Correct answer.
  4. It always results in a binding decision

Explanation

Negotiation is conducted directly by the parties, often through representatives, without a third-party neutral. It therefore represents the maximum of party autonomy and the minimum of third-party involvement on the spectrum.

Question 5Overview of dispute resolution processes and the ADR spectrum

What is the principal role of a neutral in conciliation?

  1. To assist the parties in identifying issues and exploring settlement options Correct answer.
  2. To act as a witness to the parties' agreement
  3. To represent one party's interests
  4. To decide the dispute and issue a binding award

Explanation

A conciliator actively assists the parties to communicate, clarify issues and generate settlement possibilities. The conciliator does not decide the dispute, represent a party, or merely witness the outcome.

Question 6Overview of dispute resolution processes and the ADR spectrum

Which of the following is an adjudicative process in which the decision-maker is chosen by the parties?

  1. Facilitated negotiation
  2. Mediation
  3. Conciliation
  4. Arbitration Correct answer.

Explanation

Arbitration is adjudicative because the tribunal decides the dispute, and it is distinctive because the parties typically select the arbitrators. Mediation, conciliation and facilitated negotiation are facilitative and do not produce a binding third-party decision.

Question 7Overview of dispute resolution processes and the ADR spectrum

What is the key characteristic of expert determination as a dispute resolution process?

  1. A judge decides the dispute after a full trial
  2. A third-party expert decides a specific technical issue, often bindingly Correct answer.
  3. The parties negotiate without any third party
  4. A neutral facilitates settlement without deciding

Explanation

Expert determination involves appointing a person with specialist expertise to decide a defined technical question, and the decision is usually binding by agreement. It is narrower than arbitration and differs from facilitative processes because the expert decides.

Question 8Overview of dispute resolution processes and the ADR spectrum

Which process is most accurately described as 'adjudicative but private and consensual'?

  1. Litigation
  2. Mediation
  3. Arbitration Correct answer.
  4. Negotiation

Explanation

Arbitration is adjudicative because a tribunal decides, yet it is private and consensual because it derives from the parties' agreement. Litigation is adjudicative but public and compulsory; mediation and negotiation are not adjudicative.

Question 9Overview of dispute resolution processes and the ADR spectrum

A contract contains a clause providing for 'mediation, and if that fails, arbitration.' How is such a clause best characterised?

  1. A no-dispute clause
  2. An exclusive jurisdiction clause
  3. A multi-tiered dispute resolution clause Correct answer.
  4. A unilateral option clause

Explanation

A clause that sequences different processes, typically mediation before arbitration, is a multi-tiered or escalating dispute resolution clause. It is not an exclusive jurisdiction clause, which designates a court, nor a unilateral option.

Question 10Overview of dispute resolution processes and the ADR spectrum

In which process does a third party typically hear both sides and then issue a non-binding recommendation on the merits?

  1. Binding arbitration
  2. Expert determination
  3. Non-binding arbitration Correct answer.
  4. Mediation

Explanation

Non-binding arbitration mirrors arbitration procedure but the award is advisory, giving parties a merits assessment without binding effect. Binding arbitration produces an enforceable award, mediation lacks a merits decision, and expert determination decides a technical issue bindingly by agreement.

Question 11Overview of dispute resolution processes and the ADR spectrum

What is the principal advantage commonly claimed for adjudicative ADR over litigation?

  1. The absence of any need for an agreement to arbitrate
  2. Public access to the hearing
  3. The automatic right to appeal on the merits
  4. Party control over the identity of the decision-maker and the procedure Correct answer.

Explanation

Adjudicative ADR such as arbitration allows parties to choose the tribunal and shape the procedure, which is a central claimed advantage. There is generally no automatic merits appeal, an agreement is required, and hearings are usually private rather than public.

Question 12Overview of dispute resolution processes and the ADR spectrum

Which factor most strongly favours choosing mediation over arbitration for a commercial dispute?

  1. The parties want a public precedent
  2. The parties need an enforceable decision on a point of law
  3. The parties wish to preserve an ongoing business relationship Correct answer.
  4. The dispute requires a binding determination of contested facts

Explanation

Mediation is facilitative and interest-based, which suits parties who value relationship preservation and flexible outcomes. Arbitration is preferable where a binding determination or enforceable award is required, and neither process is designed to create public precedent.

Question 13Overview of dispute resolution processes and the ADR spectrum

A party refuses to participate in a mediation provided for in a valid pre-dispute clause. What is the most likely consequence under modern ADR practice?

  1. The other party may immediately litigate on the merits regardless of the clause
  2. The mediation clause is automatically void
  3. The refusal may be treated as a breach of the dispute resolution agreement Correct answer.
  4. The refusing party automatically loses the dispute

Explanation

A valid agreement to mediate creates a contractual obligation, and unreasonable refusal to participate may amount to breach, potentially affecting costs or enforceability. It does not automatically void the clause, decide the merits, or remove the contractual precondition.

Question 14Overview of dispute resolution processes and the ADR spectrum

What distinguishes 'med-arb' from a simple multi-tiered mediation-then-arbitration clause?

  1. The mediator's settlement is automatically binding
  2. The process excludes any adjudicative stage
  3. The process always begins with arbitration
  4. The same neutral may act as mediator and then as arbitrator Correct answer.

Explanation

Med-arb combines mediation and arbitration, often with the same neutral moving from facilitator to decision-maker. A multi-tiered clause typically uses different neutrals for each stage, and med-arb still includes an adjudicative stage.

Question 15Overview of dispute resolution processes and the ADR spectrum

Which statement about confidentiality across the ADR spectrum is most accurate?

  1. All ADR processes are absolutely confidential in every jurisdiction
  2. Confidentiality applies only to expert determination
  3. Litigation is always more confidential than arbitration
  4. Confidentiality is typical of mediation and arbitration but its scope varies by process and jurisdiction Correct answer.

Explanation

Confidentiality is a common feature of mediation and arbitration, but its legal scope and exceptions differ between processes and legal systems. It is not absolute everywhere, litigation is generally public, and it is not confined to expert determination.

Question 16Overview of dispute resolution processes and the ADR spectrum

What is the effect of a valid arbitration agreement on national court proceedings concerning the same dispute?

  1. The court must decide the dispute in place of the tribunal
  2. The court automatically assumes jurisdiction over the merits
  3. A court may be required to refer the parties to arbitration Correct answer.
  4. The arbitration agreement is unenforceable

Explanation

Under instruments such as the New York Convention and many national laws, a court must refer parties to arbitration on a valid agreement unless the agreement is null and void, inoperative or incapable of being performed. The court does not automatically take over the merits or ignore the agreement.

Question 17Overview of dispute resolution processes and the ADR spectrum

Which process best fits a dispute where the parties need a quick, private, binding decision from a specialist in a technical field?

  1. Mediation with a generalist facilitator
  2. Negotiation without a neutral
  3. Public litigation before a judge
  4. Arbitration before a tribunal with relevant expertise Correct answer.

Explanation

Arbitration combines privacy, binding effect and the ability to choose specialist arbitrators, which suits technical disputes needing a prompt enforceable decision. Mediation and negotiation do not produce a binding decision, and litigation is public and less party-controlled.

Question 18Overview of dispute resolution processes and the ADR spectrum

What is the principal difference between conciliation and mediation in most modern practice?

  1. Conciliation excludes party participation
  2. The conciliator may be more proactive in proposing settlement terms Correct answer.
  3. Conciliation is binding while mediation is not
  4. Mediation requires a court order

Explanation

The terms overlap, but conciliation is often described as more evaluative or proactive, with the conciliator suggesting solutions. Neither process is generally binding, mediation does not require a court order, and conciliation depends on party participation.

Question 19Overview of dispute resolution processes and the ADR spectrum

Which of the following best describes 'early neutral evaluation'?

  1. A neutral gives a non-binding assessment of the merits early in the dispute Correct answer.
  2. An arbitrator issues a binding award after a full hearing
  3. A court refers the dispute for a public trial
  4. A mediator imposes a settlement on the parties

Explanation

Early neutral evaluation involves a neutral, often an experienced lawyer or expert, giving a non-binding view on the strengths and weaknesses of the case to encourage settlement. It is not a binding award, an imposed settlement, or a public trial.

Question 20Overview of dispute resolution processes and the ADR spectrum

In a dispute resolution clause, what does an 'escalation' provision typically require?

  1. The parties must attempt a specified process, such as negotiation or mediation, before proceeding to arbitration Correct answer.
  2. The parties must escalate the dispute directly to court
  3. The parties must waive all rights to arbitrate
  4. The parties must appoint a single arbitrator immediately

Explanation

An escalation clause requires the parties to attempt an initial process, often negotiation or mediation, before moving to a later stage such as arbitration. It does not compel litigation, waive arbitration rights, or require immediate appointment of an arbitrator.

Question 21Overview of dispute resolution processes and the ADR spectrum

Which statement about the enforceability of mediated settlement agreements is most accurate?

  1. Mediated settlements are automatically enforceable as court judgments worldwide
  2. Only arbitral awards are enforceable, never mediated settlements
  3. Enforceability depends on the applicable law and may be strengthened by instruments such as the Singapore Convention Correct answer.
  4. Mediated settlements are never enforceable

Explanation

A mediated settlement is a contract, and its enforceability depends on the applicable law; the Singapore Convention on Mediation facilitates cross-border enforcement in states party to it. It is not never enforceable, nor automatically a court judgment worldwide, and mediated settlements can be enforced.

Question 22Overview of dispute resolution processes and the ADR spectrum

Which of the following is a recognised limitation of arbitration as compared with litigation?

  1. Requirement of a public hearing
  2. Absence of any cross-border enforcement framework
  3. Limited rights of appeal on the merits Correct answer.
  4. Inability to choose the decision-maker

Explanation

Arbitration generally offers only narrow grounds for challenging an award, so there is no full appeal on the merits. Parties can choose the decision-maker, hearings are typically private, and the New York Convention provides a strong cross-border enforcement framework.

Question 23Overview of dispute resolution processes and the ADR spectrum

What is the 'seat' of arbitration primarily relevant to?

  1. The legal framework governing the arbitration and the supervisory courts Correct answer.
  2. The physical location of the parties' head offices
  3. The place where the contract was signed
  4. The nationality of the arbitrators

Explanation

The seat is the juridical home of the arbitration: it determines the procedural law and the courts with supervisory jurisdiction. It is distinct from the parties' offices, the arbitrators' nationality, or the place of contract signature.

Question 24Overview of dispute resolution processes and the ADR spectrum

A clause provides that 'the parties shall attempt in good faith to resolve disputes by negotiation, failing which either party may refer the dispute to arbitration.' What is the most likely effect of the negotiation step?

  1. It converts the process into binding expert determination
  2. It makes the arbitration clause automatically void
  3. It is a precondition that must be attempted before arbitration is commenced Correct answer.
  4. It removes the need for any arbitration agreement

Explanation

A clause of this kind creates a condition precedent: the parties must attempt negotiation before arbitration can be commenced. It does not void the arbitration agreement, convert the process into expert determination, or dispense with the need for an agreement.

Question 25Overview of dispute resolution processes and the ADR spectrum

Which combination of processes is most accurately described as 'adjudicative, private, consensual and generally final'?

  1. Arbitration Correct answer.
  2. Negotiation
  3. Conciliation
  4. Mediation

Explanation

Arbitration is adjudicative because the tribunal decides, private because hearings are usually closed, consensual because it derives from agreement, and generally final because appeals on the merits are limited. The other processes are facilitative or non-adjudicative.

Question 26Overview of dispute resolution processes and the ADR spectrum

In the standard taxonomy of dispute resolution processes, which pair of processes is best described as non-adjudicative?

  1. Expert determination and adjudication
  2. Mediation and conciliation Correct answer.
  3. Arbitration and litigation
  4. Arbitration and expert determination

Explanation

Non-adjudicative processes are those in which the third party assists the parties in reaching their own agreement rather than deciding the dispute. Mediation and conciliation both fall into this category because the neutral has no power to impose an outcome. Processes such as arbitration, litigation, expert determination and adjudication are adjudicative because a decision is imposed on the parties.

Question 27Overview of dispute resolution processes and the ADR spectrum

A party wishes to preserve its legal rights while negotiating a settlement and wants the negotiation to be treated as privileged and without prejudice. Which feature of mediation most directly supports this objective?

  1. The requirement that the mediator be a lawyer with rights of audience.
  2. The automatic stay of court proceedings once mediation is commenced.
  3. The mediator's power to issue a binding award if negotiations fail.
  4. The confidentiality of the process and the inadmissibility of settlement discussions in later proceedings. Correct answer.

Explanation

Mediation is typically conducted on a confidential and without-prejudice basis, meaning that statements made and documents produced for the mediation cannot generally be used in later litigation or arbitration. This protection encourages candid settlement discussions without prejudicing the parties' legal positions. The other options describe features that are not characteristic of mediation.

Question 28Overview of dispute resolution processes and the ADR spectrum

Which statement best captures the essential difference between arbitration and expert determination?

  1. Expert determination requires a hearing, while arbitration does not.
  2. Arbitration is always more expensive than expert determination.
  3. Expert determination is always binding and enforceable as an arbitral award.
  4. Arbitration results in an award enforceable under international conventions, whereas expert determination typically produces a contractual certification that is not directly enforceable as an award. Correct answer.

Explanation

Arbitration is a formal adjudicative process whose award is recognised and enforced across borders under instruments such as the New York Convention. Expert determination is a simpler process in which the expert decides a technical issue, and the decision is generally binding only as a matter of contract, without the international enforcement machinery of arbitration. The other options state inaccurate generalisations or reverse the characteristics of the two processes.

Question 29Overview of dispute resolution processes and the ADR spectrum

Which of the following best describes the term 'adjudicative' in the context of dispute resolution processes?

  1. The third party has the authority to make a determination on the merits that is intended to resolve the dispute. Correct answer.
  2. The process is conducted in public before a judge.
  3. The third party assists the parties in reaching a mutually acceptable settlement.
  4. The parties retain complete control over the outcome at all times.

Explanation

An adjudicative process is one in which a third party is empowered to decide the dispute or an issue within it, and that decision is intended to resolve the matter. Arbitration, litigation, adjudication and expert determination are adjudicative. Processes in which the third party merely facilitates negotiation, such as mediation and conciliation, are non-adjudicative.

Question 30Overview of dispute resolution processes and the ADR spectrum

A contract clause states: 'Any dispute arising out of or in connection with this contract shall be referred to mediation administered by [institution], and the parties agree that the mediation shall be a condition precedent to any arbitration or court proceedings.' A dispute arises and one party commences arbitration without attempting mediation. What is the most likely legal consequence?

  1. The mediation clause is automatically void because it ousts the jurisdiction of the courts.
  2. The arbitral tribunal has no jurisdiction over the dispute because only courts can enforce condition precedents.
  3. The arbitration is valid because mediation clauses are never enforceable.
  4. The arbitration may be stayed or dismissed as premature because the condition precedent has not been satisfied. Correct answer.

Explanation

Where parties make mediation a condition precedent to arbitration or litigation, courts and tribunals generally treat the obligation as enforceable and may stay or dismiss proceedings commenced in breach of it, provided the clause is sufficiently certain. The clause does not oust court jurisdiction; it regulates the sequence of dispute resolution. The other options overstate or misstate the effect of such clauses.

Question 31Negotiation: theory, styles and practice

In negotiation theory, which term describes the range between each party's reservation point within which a settlement is possible?

  1. The integrative surplus
  2. The bargaining zone Correct answer.
  3. The opening anchor
  4. The commitment point

Explanation

The bargaining zone, also called the zone of possible agreement, is the overlap between the seller's minimum acceptable outcome and the buyer's maximum acceptable outcome. A deal is possible only where these reservation points overlap.

Question 32Negotiation: theory, styles and practice

A mediator asks each side to state privately the lowest figure they would accept. Which negotiation concept is the mediator trying to identify?

  1. Each party's aspiration level
  2. Each party's opening offer
  3. Each party's reservation point Correct answer.
  4. Each party's BATNA

Explanation

The reservation point is the walk-away threshold beyond which a party prefers no agreement. It is distinct from an aspiration, which is the optimistic target, and from the BATNA, which is what happens if talks fail.

Question 33Negotiation: theory, styles and practice

Which negotiation style is characterised by high concern for one's own outcome combined with low concern for the other party's outcome?

  1. Avoiding
  2. Competing Correct answer.
  3. Collaborating
  4. Accommodating

Explanation

In the dual-concern model, competing combines high assertiveness with low cooperativeness. Collaborating pairs high concern for self with high concern for the other, while accommodating and avoiding occupy the low-assertiveness positions.

Question 34Negotiation: theory, styles and practice

A party's BATNA in a commercial negotiation is best described as which of the following?

  1. The concession pattern it plans to follow
  2. The course of action it will take if no agreement is reached Correct answer.
  3. The most generous offer it is prepared to make
  4. The first figure it puts on the table

Explanation

The BATNA, or best alternative to a negotiated agreement, is the standard against which any proposed deal must be measured. It exists outside the negotiation and determines whether walking away is rational.

Question 35Negotiation: theory, styles and practice

Which practice is most closely associated with interest-based, or principled, negotiation?

  1. Separating the people from the problem Correct answer.
  2. Concealing all information about priorities
  3. Making an early threat to signal resolve
  4. Dividing each issue into fixed slices

Explanation

Interest-based negotiation treats relationship issues and substantive issues separately so that emotions do not contaminate the merits. It then focuses on underlying interests rather than declared positions.

Question 36Negotiation: theory, styles and practice

In a purely distributive negotiation over the price of a single asset, what does one party's gain represent?

  1. A neutral outcome for both parties
  2. A cost borne by neither party
  3. The other party's equivalent loss Correct answer.
  4. A joint gain shared by both parties

Explanation

A distributive negotiation is zero-sum over a fixed pie, so value claimed by one side is value lost by the other. This is why it is often called claiming value rather than creating it.

Question 37Negotiation: theory, styles and practice

What is the primary purpose of a negotiation planning document prepared before a session?

  1. To replace the need for any oral communication at the table
  2. To disclose all confidential priorities to the other side
  3. To record interests, priorities and reservation points so tactics are deliberate Correct answer.
  4. To serve as a binding contract once both parties sign it

Explanation

A planning document forces the negotiator to identify interests, rank issues, estimate the counterparty's position and set reservation and target points. It is an internal tool and has no contractual force.

Question 38Negotiation: theory, styles and practice

A buyer opens at a very low figure and the seller's counter-offer is measured from that figure. Which psychological effect is at work?

  1. Reactive devaluation
  2. Anchoring Correct answer.
  3. Reciprocity
  4. Loss aversion

Explanation

Anchoring occurs when an initial figure disproportionately influences subsequent estimates, even when the anchor is arbitrary. Skilled negotiators counter by re-anchoring on objective criteria rather than adjusting from the other side's number.

Question 39Negotiation: theory, styles and practice

A supplier proposes that the buyer take a larger volume at a lower unit price while the buyer asks for extended payment terms. The parties trade these two issues to mutual advantage. What is this technique called?

  1. Hardball
  2. Boulwarism
  3. Logrolling Correct answer.
  4. Fractionation

Explanation

Logrolling means trading concessions across issues on which the parties have differing priorities, so each gives up what it values less. It converts a single-issue price dispute into an integrative package.

Question 40Negotiation: theory, styles and practice

During a session, one party repeatedly says 'that is my final offer' but later improves it. What does this most directly undermine?

  1. The neutrality of the mediator
  2. The confidentiality of the mediation
  3. The credibility of that party's commitments Correct answer.
  4. The enforceability of any eventual settlement

Explanation

A commitment is credible only if the other side believes breaking it carries real cost. Repeating and then abandoning a final offer signals that stated limits are tactical, weakening future commitments.

Question 41Negotiation: theory, styles and practice

A negotiator discovers that the other side's real concern is delivery reliability rather than headline price. What is the most effective response?

  1. Offer a package trading price against guaranteed delivery terms Correct answer.
  2. Hold firm on price and ignore the delivery issue
  3. Increase the price to capture the other side's urgency
  4. Withdraw the delivery issue to keep talks simple

Explanation

Once the counterparty's priority is known, a package can be built that gives them what they value most in exchange for movement on price. This is the practical application of interest-based, integrative bargaining.

Question 42Negotiation: theory, styles and practice

Which statement best captures the difference between a position and an interest in negotiation?

  1. A position is confidential; an interest is always disclosed to the other side
  2. A position is a stated demand; an interest is the underlying need that explains it Correct answer.
  3. A position concerns money; an interest concerns only legal rights
  4. A position is flexible; an interest is fixed and cannot be traded

Explanation

Positions are what parties say they want, while interests are why they want it, such as security, reputation or cash flow. Negotiating from interests widens the options available for satisfying both sides.

Question 43Negotiation: theory, styles and practice

A party sets an ambitious target, prepares objective criteria such as market benchmarks, and rehearses a walk-away alternative before meeting. Which planning element is missing from this description?

  1. A schedule of press releases
  2. A list of the other side's lawyers
  3. An assessment of the counterparty's interests and constraints Correct answer.
  4. A written record of the meeting venue

Explanation

Effective planning covers both sides of the table: your own targets and limits, and the other party's interests, alternatives and constraints. Without that analysis the package cannot be tailored to create joint gains.

Question 44Negotiation: theory, styles and practice

In a multi-issue negotiation, a party concedes slowly on issues it values highly and quickly on issues it values little. What risk does this pattern create if observed?

  1. The other side learns its true priorities and can exploit them Correct answer.
  2. The other side will refuse to make any reciprocal concessions
  3. The other side will conclude the party has no reservation point
  4. The other side will assume the issues are unrelated

Explanation

Concession patterns leak information about relative priorities, allowing a counterparty to demand movement precisely where it matters most. Skilled negotiators manage the pace and framing of concessions to limit that inference.

Question 45Negotiation: theory, styles and practice

A mediator in a commercial dispute notices that both sides are focused on past blame. Which negotiation technique would most help shift them toward settlement?

  1. Adjourning indefinitely until positions soften
  2. Suggesting that one side apologise unconditionally
  3. Encouraging each side to restate its legal claim in stronger terms
  4. Reframing the discussion around future interests and options Correct answer.

Explanation

Reframing moves parties from positional, backward-looking argument toward forward-looking interests and possible solutions. It preserves the relationship while opening space for joint problem-solving.

Question 46Negotiation: theory, styles and practice

Which tactic is most consistent with an accommodating style in a negotiation where the relationship matters more than the immediate outcome?

  1. Conceding on a minor term to preserve goodwill for future dealings Correct answer.
  2. Threatening litigation to force a rapid settlement
  3. Refusing to discuss the matter until the other side moves first
  4. Demanding a written admission of fault before any discussion

Explanation

Accommodating sacrifices own concerns to satisfy the other party, and is rational where the relationship or future business outweighs the current issue. A minor concession used deliberately fits that logic.

Question 47Negotiation: theory, styles and practice

A party refuses a proposal solely because it was put forward by the opposing side, even though the terms are objectively favourable. Which cognitive bias does this illustrate?

  1. Hindsight bias
  2. Reactive devaluation Correct answer.
  3. Framing effect
  4. Sunk cost fallacy

Explanation

Reactive devaluation is the tendency to discount a proposal's value because of its source rather than its content. Mediators counter it by having proposals presented neutrally or attributed to a third party.

Question 48Negotiation: theory, styles and practice

In a negotiation conducted through counsel, one party's lawyer makes a low opening demand and signals flexibility. What is the most likely strategic purpose of pairing an anchor with a signal of flexibility?

  1. To set a favourable reference point while keeping the other side engaged Correct answer.
  2. To transfer the decision-making authority to the mediator
  3. To guarantee that the final figure will equal the opening demand
  4. To satisfy a legal requirement to disclose the reservation point

Explanation

An anchor shapes the range of discussion, but a rigid anchor can end talks early. Signalling flexibility keeps the counterparty at the table while the reference point is established.

Question 49Negotiation: theory, styles and practice

A negotiator's BATNA improves substantially midway through talks. What is the correct analytical consequence?

  1. The reservation point falls because the alternative is now more attractive
  2. The reservation point rises and the negotiator can credibly demand more or walk away Correct answer.
  3. The bargaining zone necessarily disappears
  4. The negotiator must disclose the improved alternative to the other side

Explanation

A stronger BATNA raises the value of no agreement, which raises the reservation point and shifts the bargaining zone in that party's favour. It also makes a threat to walk away more credible.

Question 50Negotiation: theory, styles and practice

Two parties each rank three issues in opposite order of importance. Which outcome is most consistent with integrative bargaining theory?

  1. The parties defer all three issues to a mediator's final decision
  2. Both parties concede equally on every issue to reach the midpoint
  3. Each concedes most on the issue it values least, producing joint gains Correct answer.
  4. The stronger party claims all value on its most important issue

Explanation

Opposing priority rankings are precisely the condition under which logrolling creates value, because each side can give away cheaply what the other values highly. Equal concessions on every issue forgo that opportunity.