Game Theory and Conflict Resolution

GAME THEORY AND CONFLICT RESOLUTION
Law School
Federal University of Minas Gerais
Working paper
2022/02/03
Reinaldo Diogo Luz*

Elton Pupo Nogueira†
Fabiano Teodoro de Rezende Lara‡
Abstract
Conflicts arise in all areas where there is interaction between people, whether individuals or
legal persons. Conflict resolution in a democratic state governed by the rule of law happens
mainly through judicialization but aiming at a rapid and effective access to justice, Brazil,
alongside other countries, has encouraged the use of alternative means of conflict resolution,
including conciliation and mediation, which have even been incorporated as a stage of the
judicial process to encourage cooperation between the parties. However, conflict actually is a
mixture of cooperation and competition between parties with interdependent interests, which
makes the application of the Game Theory appropriate. This paper discusses the application of
Game Theory to conflict resolution, in the judicial process, presenting the concepts of Game
Theory and proposing how they can be used in the analysis of conciliation and mediation. The
use of Game Theory allows for a change of the incentives involved and either enables
satisfactory and fast agreements or avoids an opportunistic use of mediation, conciliation, and
judicial procedure as delaying tactics, thus contributing to effective and rapid access to justice.
Keywords Game theory. Conflict resolution.
JEL Classifications K
*
D. Sc. in Law by the Federal University of Minas Gerais Law School (2017), visiting scholar at the Stockholm
School of Economics (2014-2015). Post-doctoral Candidate in Law at the Federal University of Minas Gerais.
Guest lecturer at the Federal University of Minas Gerais Law School Graduate Program. Researcher at the
Economic Law Study Group of the Federal University of Minas Gerais.
†
M. Sc. Candidate s at the Federal University of Minas Gerais Law School. Postgraduate in Contract Law and
Consumption from the Faculty of Law of the University of Coimbra, Portugal (2014), and in Civil Law from the
Paulista State University (2000). Judge of the Court of Justice of Minas Gerais. Researcher at the Economic Law
Study Group of the Federal University of Minas Gerais.
‡
D. Sc. in Law by the Federal University of Minas Gerais Law School (2008). Associate Professor of Economic
Law at the Federal University of Minas Gerais Law School (Undergraduate, Master and Doctorate) and Visiting
Professor at Facoltà di Giurisprudenza dell'Università degli Studi di Trento (2018). Member of the Institute of
Lawyers of Minas Gerais (IAMG). Member of TJD-MG. Member of the Arbitration Committee of OAB/MG.
Coordinator of the Economic Law Studies Group of the Federal University of Minas Gerais.
Electronic copy available at: https://ssrn.com/abstract=4026952

1 Introduction
The issue of conflict resolution is essential for modern societies. Conflicts arise in all
areas where there is interaction between people, whether physical or legal.
The transaction costs indicated by Coase in his best-known article, “The Problem of
Social Cost” (COASE, 1960), include those arising from the costs from conflict resolution.
Increased transaction costs can discourage economic agents from not being able to
estimate the risks involved in economic activity. The costs involved in contractual compliance
or forced execution of the transaction by means of conflict resolution significantly influence
the measures to be taken during the negotiation.
These conflict resolution costs in transactions are largely related to the expected legal
certainty in conflict resolution and efficient use of resolution instruments, as a means of
optimizing the allocation of economic resources, and thus maximizing their utilities, in the
search for higher levels of well-being (COOTER; ULLEN, 2010). Efficient action in conflict
resolution is useful to reduce the costs of the expected conduct to be precautionary in
transactions.
As a result, the realization of an economic activity becomes more expensive the greater
the risks to be considered and also the higher the costs of conflict resolution by the consideration
of these risks.
The main means of resolving conflicts in a Democratic State of Law is judicialization.
In Brazil, the right of access to justice is contained in the 1988 Constitution which established
the principle of mandatory judicial control by establishing that “the law will not exclude from
the assessment of the judiciary any injury or threat to law” (art. 5, item XXXV).
Effective access to justice requires the timing of the decision, especially in conflicting
situations, the Constitution itself assures everyone, both in the judicial and administrative
spheres, “the reasonable duration of the process and the means that ensure the speed of its
procedure” (art. 5, item LXXVIII).
With the expansion of the search for rights, the judiciary has been increasingly
demanded. Just like in other countries (e.g. BLAKE, BLAKE, BROWNE; SIME, 2016, p. 311),
Brazil has encouraged the use of alternative means of conflict resolution: conciliation,
mediation and arbitration. Although these methods are applied extrajudicially, the first two were
also inserted in the judicial sphere, in the context of a multi-door system (SALES; SOUSA,
2018, p. 205).

Thus, the current Code of Civil Procedure (CPC/15),1 Law No. 13,105, of March 16,
2015, gives particular relevance to the consensual settlement of conflicts (Art. 3, § 2), which
should be encouraged by judges, lawyers, public defenders and members of the Public
Prosecutor's Office (art. 3, § 3), and the courts should create “judicial centers of consensual
resolution of conflicts” to hold conciliation and mediation hearings and to develop programs
with the objective of “assisting, guide and stimulate self-composition” (art. 165).
In line with these legal predictions, literature generally gives great emphasis to
alternative autocomposition dispute resolution methods, such as mediation and conciliation,2
highlighting its positive points, especially the supposed harmony in the composition of interests
brought by the agreement between the parties,3 the result of a more idealized than real
cooperation. Moreover, it acts as if the mediator, however impartial, is devoid of interests (e.g.,
regarding the will to rapidly reaching an agreement).
In fact, it is known that in a conflict environment there is a mixture of cooperation and
competition (COOTER; RUBINFELD, 1989, p. 1069; SCHELLING, 1980, p. 15) and that the
parties have interdependent interests, that is, the outcome for one side depends not only on their
decision but also on the decisions taken by the other parties.
Due to the interdependence of payoffs between the parties, this is an appropriate
situation for the application of game theory, which recognizes that both cooperative and
competitive interests can be intertwined in conflicts.
Moreover, the obtaining of an agreement, whose emphasis is on the speed of the
conclusion of the process, does not imply the effective resolution of conflicts and, in the
Brazilian case, does not guarantee that some of the legal principles of conciliation and
mediation, independence, autonomy of will and informed decision-making are being followed.4
This happens because it is adopted an assumption of information symmetry that does
not seem reasonable. In general, one of the parties has a greater knowledge about the
1
With regard to conciliation, the Code of Civil Procedure of 1973 (Law No. 5,869 of January 11, 1973) already
brought its use as a fundamental stage of the summary rite process (art. 277), and, with the amendment included
in Law No. 8,952/1994, made the conciliation hearing in the ordinary procedure of knowledge mandatory. In
addition, it should be noted that before dthe preparation and validity ofthe new Code of Civil Procedure, the
country Resolution No. 125/2010 of the National Council of Justice, already represented a prominent normative
instrument about the mediation and conciliation in court.
2
Arbitration, as well as the legal dispute, is a method of heterocomposition, because the decision comes from a
third party, an arbitrator, or a judge.
3
It is common the distinction between autocomposition, in which the parties reach a solution to the dispute, and
heterocomposition, in which a solution is imposed by a third party or by through interest-based mechanisms
(interest-based), rights (rights-based) or power (power-based) (URY; BRETT; GOLDBERG, 1988).
4
Besides these, Art. 166 of the CPC/15 provides for the principles of impartiality, of the confidentiality, orality,
and informality.

circumstances and values involved, and may, in the language of the Game Theory, elaborate a
more precise belief as to the probable decision of the judge, if the dispute proceeds. The value
of the payoff in time, biases and attitude towards risk are also often disregarded.
Also, the interactions that occur while the conflict develops in the judicial phase, in case
of non-realization of agreement, can use the theory of games with identification of the acting
practices, so that players can use procedural tools to modify attitudes in time.
This paper discusses the application of concepts of Game Theory to conflict resolution
with focus on the judicial sphere. The objective here is to present in a precise way the concepts
of the Game Theory and how it can contribute to the analysis and, consequently, to the
effectiveness of conciliation, mediation, and procedural progress in the judicial process,
including the performance of conciliators and mediators, lawyers and judges.5
In the next section we present a conceptualization of the alternative conflict resolution
processes, focusing on negotiation. Sections 3 and 4 will present concepts and terminology used
in Game Theory, as well as how they can be used in the analysis of dispute resolution processes.
Section 5 analyzes the application of game theory when the conflict moves on to the judicial
process and how they can influence the duration of the process. Cooperation in the judicial
phase makes the process of resolving the conflict more efficient and allows the creation of a
legal environment with less cost and more legal certainty, capable of attracting business and
investments.
Some conclusions are presented at the end.
2 General Aspects of Conflict Resolution Processes

Mediation and conciliation, as well as other alternating conflict resolution processes,6
are considered effective options for judicialization (HILL, 1998, p. 173).
This effectiveness would be due to being more accessible to stakeholders, providing
greater protection to secrecy and, mainly, offering greater speed and lower cost for
5
By virtue of the objective of the article, the work focuses on conciliation and mediation, but the concepts
presented can also be useful in conducting other conflict resolution processes.
6
There are conflicts (no pun intended) in the literature on the adequacy of the terminology “alternative conflict
resolution” (the Brazilian National Council of Justice – CNJ, in a more current line, adopts “Appropriate Dispute
Resolution”, for example), as well as on which cases would integrate this classification, with authors excluding
arbitration, due to the fact that the decision is up to a third party, as in the judicial process, and others understanding
that the negotiation is also not technically part of the group, because there are no third parties involved (BLAKE;
BROWNE; SIME, 2016, p. 5), despite the similarities in relation to the principles it has with the mediation of
(BLAKE; BROWNE; SIME, 2016, p. 167). Another point of dissent in literature is the very way they are called.
Technique, method and process are used as if they were synonymous by different authors. However, these
discussions go beyond and, more importantly, are not relevant to the scope of this work, which will adopt the
denomination process. It seems to be the most coherent option, as these are alternatives to a lawsuit.

peacemaking solutions to conflicts to be achieved (BLAKE; BROWNE; SIME, 2016, p. 7;
CAETANO, 2002, p. 104; CINTRA et al., 2009, p. 33).
Although there is no clear definition of what alternative conflict resolution processes
would be (BLAKE; BROWNE; SIME, 2016, p. 5),they can be understood as processes that aim
to achieve some form of “accommodation, which may not necessarily reflect the legal position
of the parties, but which is a solution they can accept” (COHEN, 2003, p. 2, our translation).
Internationally, there is no precise conceptualization of what mediation and conciliation
would be, and they are often used to describe the same process (BLAKE; BROWNE; SIME,
2016, p. 347). In general, they are defined as informal, voluntary and non-binding processes,7
in which a neutral third party assists the parties, who are at a standstill, helping them to reach a
mutually beneficial agreement (BARCELLAR, 2003, p. 66; BLAKE, BLAKE, BROWNE;
SIME, 2016, p. 347; BRAZIL, 2015, p. 35; HILL, 1998, p. 176; NAZARETH, 2006, p. 130;
SERPA, 1997, p. 105). Unlike arbitration, in which the arbitrator may impose a decision, the
mediator/conciliator would only help the parties decide whether to reach an agreement and on
what terms (HILL, 1998, p. 176).
In Brazil, in relation to mediation, Article 1 of Law No. 13,140/2015 defined that:
Sole paragraph. Mediation is considered the technical activity carried out by an
impartial third party without decision-making power, which, chosen or accepted by
the parties, helps and encourages them to identify or develop consensual solutions to
the controversy.
Additionally, the Code of Civil Procedure, in its art. 165, distinguished these
autocompositive processes as follows:
§ 2 - The conciliator, who will act preferably in cases where there is no previous link
between the parties, may suggest solutions to the dispute, being denied the use of any
kind of embarrassment or intimidation for the parties to reconcile.
§ 3 - The mediator, who will act preferably in cases where there is a previous link
between the parties, will help interested parties to understand the issues and interests
in conflict, so that they can, by restoring communication, identify, by themselves,
consensual solutions that generate mutual benefits.
Stands out the authorization in Brazil to the conciliator to suggest solutions to the
conflict, which is not allowed to the mediator, although there are those who take the opposite
(INTERNATIONAL LABOUR OFFICE, 2007, p. 14).
According to the CNJ, in summary form, mediation would be used in multidimensional
or complex conflicts and would constitute a structured procedure, while conciliation would be
applied, preferably, to simpler, or restricted conflicts, to be resolved more briefly, and in which
7
According to the CNJ, a process is binding “when interested parties have the burden of participating in procedural
acts – in which the withdrawal of participation in the proceedings generates a procedural loss and a potential
material loss” (BRAZIL, 2015, p. 35).

the third party would be more appropriate. However, both are not required to result in an
agreement (BRASIL, 2015, p. 35–37).
Conciliation would then be “a much broader concept than the formalized ‘agreement’”,
meaning “understanding, re-establishing disharmonic relations, empowerment, empowerment,
disarming of spirit, adjustment of interests” (SENA, 2011, p. 122).
Both mediation and conciliation bring a great concern with the human side of disputes,
with the construction of a harmonic relationship. It seeks to help the parties “better understand
their positions and find solutions that are compatible with their interests and needs”, achieve
“effective social harmonization” between them, “humanize the dispute resolution process”,
“allow the parties to feel heard” and “a constructive solution to the conflict” (BRASIL, 2015,
p. 36–37). In a forum, the change of “a culture of litigiousness [..] for a culture of pacification”,
as stated by Minister Ricardo Lewandowski, then president of the Brazilian Supreme Court
(MACEDO, 2014).
However, as already mentioned, situations of conflict are a combination of cooperation,
yes, but also of competition. Forgetting about this restricts the ability of these processes to
contribute to conflict resolution.
For the application of Game Theory, it is important to understand, then, that all conflict
resolution processes have the parties playing with each other, and eventually according to the
situation one wishes to model, with a neutral third party. Each one with particular objectives
that are not necessarily identical. There may or may not be coordination between them. The
result for each of you players depends on your decisions, but also on the decisions of the other
players, and will depend on the characteristics of the players and the information they have. All
these assumptions, variables and parameters affect the decisions of the players and,
consequently, the result they will actually get.
3 Relevant Concepts of Game Theory for Conflict Resolution

The modern Game Theory derives from the work of John von Neumann and Oskar
Morgenstern, originally published in 1944, extended and generalized prominently by John F.
Nash, Jr., John C. Harsanyi and Reinhard Selten, among others, from 1950.
It is away to study human behaviour, based on mathematical modelling, widely used in
Economics and Administration, but with potential applications also in other social sciences such
as Political Science and Law.

In order to avoid misunderstandings in the use and interpretation of Game Theory, to
advance in its presentation and then in its application to conflict resolution, it is important to
clarify the terminology adopted in Game Theory.
Initially, it should be emphasized that the term game refers to the totality of rules that
describe the situation to be modelled, while movements or actions are the alternatives that can
be chosen (played) by a player at a given time. Finally, strategies are action plans considering
the different moments and circumstances of the game.8
Briefly, for configuration and a strategic situation as a game, itis necessary to identify
and relate some characteristics, the so-called elements of the game. These are the players (the
agents involved in the strategic interaction), the possible moves (or actions) for each player,
given the information available to the player, and the payoffs associated with each move,9
considering the possible movements of the other players (VON NEUMANN;
MORGENSTERN, 1953, p. 46–47).
An essential presupposition for Game Theory is the question of rationality. An agent is
rational if your choice will always be in the sense of maximizing its usefulness, according to
your preferences (e.g. VON NEUMANN; MORGENSTERN, 1953, p. 8–9). The following
considerations are based on rational agents, as adopted by a wide literature, but the question of
rationality will again be brought to the end of the section, especially to face questioning as to
deviations from this assumption.
In possession of the basic concepts, one can then advance in the typology of the games.
In his seminal work, “Theory of Games and Economic Behaviour”, originally released
in 1944, von Neumann and Morgenstern presented the distinction between zero-sum games and
non-zero sum games. In the former, the gain of one player implies the equivalent loss of the
other. In games with a sum other than zero, players can win simultaneously, in different
8
If the player only has one decision moment, the strategy consists of choosing only one action, which leads to
frequent confusion between these terms. The term strategy can also be used in the sense of “set of principles
governing the choices” of the player (VON NEUMANN; MORGENSTERN, 1953, p. 49). Strategies as
conceptualized in the text are called pure strategies. There is also the possibility of the adoption of what is called
mixed strategies, i.e. the allocation of probabilities to the different strategies (VON NEUMANN;
MORGENSTERN, 1953, p. 148).
9
The pay-off (often called by the English term, payoff) is the result received by the player at the end of the game.
It can be presented in monetary value or as a measure of usefulness to the player. The use of the notion of utility
brings well-known theoretical and practical difficulties in the literature (e.g. VON NEUMANN;
MORGENSTERN, 1953, p. 8), but that will not be addressed here, being sufficient for the present work to
understand that the values attributed to the pay-offs, whether monetary, are useful, aims to order the individual
preferences of each agent, and should not be used to compare different player preferences (VON NEUMANN;
MORGENSTERN, 1953, p. 16), although there are authors who consider this possibility (e.g. BINMORE, 2015,
p. 10).

proportions (VON NEUMANN; MORGENSTERN, 1953, p. 46–47). These types of games are
often referred to the terms win-lose and win-win, respectively.
The fact that there is a situation in which all players can win simultaneously does not
imply coordination between them, but only that when coordination occurs, agents can have
greater gains. And why does coordination not always occur since it would be positive for the
agents? As Wright points out (2000, p. 25), non-zero sum games present two major obstacles
to cooperation: the first would be the possibility of “cheating, or parasitism”, known in
Economics as free riding, which causes an agent to enjoy the benefits of a measure without
contributing to its realization; and the second is the fact that within every zero-sum game there
is a zero-sum “dimension”, that is, agents have to decide how to distribute the additional gains
from cooperation, and in this case it is a zero-sum game.
It is interesting to point a common error that associates the classification between zero-
sum games and non-zero-sum games to the one that divides games into cooperative and non-
cooperative games.10 Cooperative games do not correspond to non-zero sum games and non-
cooperative games have no identity with non-zero sum games.11 Cooperative games involve
situations in which there is the possibility of communication and formation of coalitions, with
joint choice of strategy by the players, due to the existence of a mechanism that ensures
cooperation (NASH, 1951, p. 295; RAPOPORT, 1974, p. 4; ROSS, 2019)12 as a contract
between the parties. Noncooperative games, on the other hand, are conceptualized as scenarios
in which it is impossible for players to collaborate or communicate, so that each player decides
independently (NASH, 1951, p. 286). As already mentioned, regardless of the type game, there
will be cooperation, but it must be self-imposed (ROSS, 2019), that is, based on credible threats
or promises, concepts that will be presented later, or developed by virtue of
experience/reputation, in a kind of dynamic game called repeated games (the same base game
played multiple – or infinite – times).13
10
Although Nash (1953, p. 128) used the theme cooperative to describe the situation where players have interests
that are “neither completely opposed nor completely coincident”, Schelling (1980, p. 89) points to the difficult
created by this nomenclature. For this author, while the zero-sum game correctly portrays a situation of pure
conflict, there is no specific denomination for scenarios in which there is full cooperation (where interests are
perfectly aligned) and for those in which there is a mixture of competition and cooperation, suggesting the adoption
of the terms bargain or mixed-motivation games, for the former, and cooperation games, for the latter.
11
Obviously, because of logical impossibility, there are no zero-sum cooperative games with two players.
12
By avoiding, thereby, the hold-up, that is, the possibility of one of the agents waiting for another to perform his
part of the agreement, for example renouncing a right, and not fulfilling the part that was his, obtaining greater
pay-offs. Concerns about the hold-up would, of course, make it difficult to form coalitions and agreements.
13
V. Axelrod (1984).

While non-cooperative games aim to identify optimal strategies for each player, using
the concepts of dominance and Nash’s famous equilibrium,14 cooperative games, which can be
understood as games between player coalitions, try to identify how players articulate in
coalitions and how members of the formed coalitions divide among themselves the payoffs
obtained from joint action (RAPOPORT, 1974, p. 5), by means of a variety of solution concepts
(nucleus, nucleolus, von Neumann-Morgenstern solution and Shapley value),which in itself
brings a problem of choice and requires that the fundamentals of the adopted technique be
examined to verify whether it is appropriate to the situation (MASCHLER, 2000, p. 4).
The concepts of cooperative and non-cooperative and zero-sum games and non-zero
games cause, in fact, some confusion, especially in Brazil, taking some authors to associate the
idea of cooperation as having begun with Nash, ignoring the contributions of von Neumann and
Morgenstern in their ground-breaking work in the study of non-zero sum and coalition games,
and results in the use of concepts and solutions of the Theory of Non-Cooperative Games to
games that are considered “cooperative”15 (e.g. ALMEIDA, 2003; ANDRADE, 2014).
Fortunately, however, this conceptual-terminological inaccuracy has no major consequences,
provided that it does not hinder the identification of the relevant characteristics to be
incorporated in the development of the model. The reason for this is that Nash demonstrated
that cooperative game solutions can be obtained by reducing them to equivalent non-
cooperative games (NASH, 1951, p. 295, 1953, p. 129), which was ratified and extended under
different assumptions in later works (e.g. BINMORE; RUBINSTEIN; WOLINSKY, 1986;
MUTHOO, 1990; OSBORNE; RUBINSTEIN, 1994; RUBINSTEIN; HARVEST;
THOMSON, 1992).
This issue is particularly important in the context of the bargaining problem, i.e., a
“situation [involving] two individuals who have the opportunity to collaborate for mutual
14
Dominance means the identification, if any, of a player’s strategy that always results in higher pay-offs for him,
i.e., a strategy that dominates the other, be it strict (if the pay-off obtained with this strategy is greater than the
pay-offs provided by All other strategies) or be it weak (if there is at least one other strategy that gives the same
pay-off), regardless of the strategies chosen by the other players. The identification of dominant strategies for each
player is made by a process of iterative elimination of strictly dominated strategies. If there are dominant strategies
for each player, this combination of strategies is a dominant strategy equilibrium. Nash equilibrium, on the other
hand, is the combination of strategies where each player’s strategy is the best response to the strategies of the other
players, that is, no player can increase their pay-off by unilaterally modifying their choice (MYERSON, 1991, p.
93). A game can have one Nash equilibrium, several ones or even none – except with mixed strategies (see above,
note 8), when there will always be at least one Nash balance.
15
In Chapter 9 of their book “Theory of Gamess And Economic Behaviour”, John von Neumann and Oskar
Morgenstern work with the relaxation of the non-zero sum assumption, deal with coalition games and offer a
general solution for games non-zero sum.

benefit in more than one form” (NASH, 1950, p. 155),16 which adequately represents the
scenario faced by the various forms of dispute resolution.
As Myerson (1991, p. 370) points out, the equivalence of approaches identified by Nash
means that:
[C]ooperative actions are the result of some process of bargaining among the
“cooperating” players, and in this bargaining process each player should be expected
to behave according to some bargaining strategy that satisfies the same personal
utility-maximization criterion as in any other game situation. That is, in any real
situation, if we look carefully at what people can do to reach an agreement on a joint
cooperative strategy, in principle we should be able to model it as a game in extensive
(or strategic or Bayesian) form and then predict the outcome by analyzing the set of
equilibria of this game.
However, the author reflects that the construction of a model that describes in detail how
agents can behave in a bargaining situation can lead to a game with multiple equilibria (see
above, note 14impossibility of identifying a single cooperative solution (MYERSON, 1991, p.
371).
The answer to Nash’s multi-equilibria problem was brought with the focal point
concept, developed by Thomas C. Schelling in 1960. A focal point is a Nash equilibrium of a
game that brings some prominent, remarkable, and unique feature that allows the coordination
of players, who will converge to said balance, and is dependent on time, place and who are the
players involved (SCHELLING, 1980, p. 57–58).17 The notion of focal point thus allows
coordination in scenarios of common interests (tacit coordination) and in those of divergent
interests, regardless of the possibility or not of communication between players (tacit bargain
or explicit bargain, respectively) (SCHELLING, 1980, p. 54 et seq.), and is therefore very
useful in conducting conflict resolution processes.
Having clarified the issue of cooperation and the consequences of it, with enormous
practical effect for the present work, we can resume the description of other concepts relevant
to the application of Game Theory to conflict resolution.
An important classification distinguishes simultaneous and sequential games. In
simultaneous, or static, games, each player makes his or her move at the same time. Despite the
16
Rubinstein (1982, p. 97) explains the bargaining problem as a situation in which two individuals have before
them several possible contractual agreements. Both have interests in reaching an agreement, but their interests are
not entirely identical. What will be the contract agreed upon then, assuming that both parties behave rationally?
17
The author gives, among others, an example of a couple who part in a store in having hit where they should meet
if this happened. Each of them would tend to think about what would be the logical place to meet again. Logical
enough that the other also thought the same (SCHELLING, 1980, p. 54). As the author points out, identifying a
response such that is mutually recognized as the key for the problem may depend more on imagination than on
logic, it may depend on analogy, precedent, accidental arrangement, symmetry, aesthetic or geometric
configuration, case-by-case reasoning and who are the parts and what they know about each other (SCHELLING,
1980, p. 57).
10

indication of temporal concurrency, what is relevant is that each player chooses its movements
without knowing the choice of the other (OSBORNE; RUBINSTEIN, 1994, p. 3), even if the
choice occurs in a later moment. They are usually represented in their normal or strategic form,
i.e., by an array that indica the payoffs according to the combination of players’ strategies.
Sequential, dynamic, or extensive games describe a sequence of decisions to be made
by players, which permits the representation of situations that take place in successive stages,
allowing players to reconsider their strategy from the course of the game (OSBORNE;
RUBINSTEIN, 1994, p. 87). They appear, in general, in the so-called extensive form, i.e., as a
decision tree.
When considering sequential interactions, dynamic games allow you to analyse credible
threats and promises. Threats and promises are considered credible if the player can commit to
carry them out (NASH, 1953, p. 130; OSBORNE; RUBINSTEIN, 1994, p. 87). For this,
fulfilling the threat or promise must be, in fact, in the interest of the player who makes them. If
in a given situation, fulfilling the threat or promise made causes the player to have a lower
payoff, they are considered non- credible, and one should disregard their possibility of
occurrence.18
Related to the characterization as simultaneous or sequential is one of the most relevant
issues in Game Theory, which refers to the information available to players at the time they
decide each of their actions.
Two classifications deal with this issue, the one that divides the games into perfect
information and imperfect information, and the other that divides them into complete and
incomplete information, being important to correctly understand both.
In a perfect information game, every player when making his or her decision knows the
history of the game, that is, the previous moves that were performed by the other players (and
by himself, obviously). If any player, at a time in the game, has to decide without knowing what
happened before his move, or having forgotten how he played previously, the situation is
described as a game of imperfect information (HARSANYI, 1967, p. 163; OSBORNE,
RUBINSTEIN, 1998, p. 197).
On the other hand, in a complete information game, all players know the structure of the
game, the rules, that is, its elements: each player’s possible actions, the payoffs arising from
each and, thus, their preferences (HARSANYI, 1967, p. 163; OSBORNE; RUBINSTEIN,
18
To do so, the game must be solved through the subgame perfect Nash equilibrium concept, which will allow the
analyst to eliminate, through a method known as reverse induction, possible Nash equilibria based on non-credible
promises or threats (OSBORNE; RUBINSTEIN, 1994, p. 97–99).
11

1994, p. 197). Additionally, players know that others know, which means that in a complete
information game the elements of the game are of common knowledge. In a non-mathematical
formulation “two people, 1 and 2, have common knowledge of an event E if they both know it,
1 knows that 2 knows it, 2 knows that 1 knows it, 1 knows that 2 knows that 1 knows it, and so
on” (AUMANN, 1976, p. 1236).19
When in a situation of strategic interaction, the agents do not have full knowledge of
what happened up to that moment, or do not know exactly who they are playing with, there is
a situation of uncertainty. If this affects only one, or some, of the parties, there will be an
asymmetry of information between players. This asymmetry of information can be exploited by
one player to the detriment of the others, hindering cooperation.
Harsanyi (1967, p. 159) proposed a way to deal with these situations in which at least
one player has uncertainty about “important parameters of the game situation, such as the
payoffs and strategies available to other players, or about the information that other players
have about the game”. The so-called Harsanyi Transformation turns a game of incomplete
information into one of complete but imperfect information, considering that the player is able
to formulate a distribution of subjective probabilities (or, beliefs) about the possible alternatives
to the unknown parameter (in a simplified way, the player does not know with whom he or she
is playing, but knows who he could be playing with, elaborating his strategy according to the
different types and their odds). This solution thus enables the analysis of situations in which the
information is asymmetric and is called bayesian equilibrium.20
As Rubinstein (1985, p. 1152) acknowledges, in incomplete information games, “new
elements” arise, the possibility of a player deducing the type of the other player from the
movements of the other player in the game or of trying to deceive the other player as to his own
type, which allows the incorporation into the models of concepts such as reputation (credibility
of promises and threats of a player according to his previous movements), signalling (one player
indicating his type to the other) and self-selection (a player’s decision depends on a
characteristic or belief of his own). These elements enable a more realistic modelling of
strategic interaction situations.
19
Common knowledge is considered one of the basic assumptions in Game Theory (RENY, 1988, p. 363;
RUBINSTEIN, 1989, p. 385). Although its imprescindibility is questionable in relation to the rationality of the
players (AUMANN; BRANDENBURGER, 1995, p. 1161–1162), it is of great importance for achieving
cooperation in strategic interactions (MORRIS; SHIN, 1997, p. 171; RUBINSTEIN, 1989, p. 385).
20
Because the construction of the player’s distribution of subjective probabilities, or the updating of individual
beliefs, is made based on the Bayes’ Theorem, which allows updating the probability of an event through the
probability of another event (using conditional probabilities).
12

Still in relation to the types of players involved in a game, it can be critical to identify
the level of impatience and behaviour in the face of the risk of each of them
Impatience refers to the value that each of them attributes to time. At first, players would
generally be interested in anticipating their payoffs (KOOPMANS, 1960, p. 287). In a
bargaining game, for example, everyone would be interested in reaching the agreement as soon
as possible, or, in other words, the utility of the agreement would decrease over time for each
of the players. However, impatience can be asymmetric, so the utility could decrease at different
rates for each player (LEHRER; PAUZNER, 1999, p. 394; RUBINSTEIN, 1985, p. 1153), or
even a player could have utility increasing over time. In this sense, it seems reasonable to expect
that the most impatient player will make sooner or larger concessions to sign a deal, leading to
a worst result in the equilibrium (DIXIT; NALEBUFF, 1991, p. 300; OSBORNE;
RUBINSTEIN, 1994, p. 126). The representation of patience consists in the application of a
discount factor, which will adjust the payoff amounts in relation to the time elapsed to obtain
it.
Risk behaviour indicates how an agent orders his or her preferences in the face of
uncertainty about the payoff. Generally speaking, a risk-neutral player is indifferent between
receiving as a payoff a certain value or an expected value in the same amount (resulting from
weighting his or her payoff alternatives for their respective probabilities of occurrence, i.e., the
outcome of a lottery), while a risk-averse player prefers the right payoff to the lottery, and one
prone to risk, the reverse (STEFÁNSSON; BRADLEY, 2019, p. 77–78).21
Particularly in bargaining games, several authors have pointed out that increasing a
player’s risk aversion reduces their payoff, i.e., risk-prone players would have an advantage in
the game (BINMORE, 2007; MUTHOO, 1999; OSBORNE; RUBINSTEIN, 1994; ROTH,
1985, 1989). The idea is quite intuitive. Players averse to risk will likely prefer a deterministic
outcome of an agreement to an uncertain result that will come in case of disagreement.22
Finally, we have to deal with the question of rationality. As noted earlier, much of the
literature on Game Theory assumes that agents are rational, that they wish to maximize their
expected utility, according to their preferences.
21
Although this way of representing attitudes towards risk, based on the expected utility of von Neumann-
Morgenstern, is the most used in both Economic Theory and Decision Theory, there are other possible treatments
(STEFÁNSSON; BRADLEY, 2019, p. 78). This discussion goes beyond the scope of the present study, which
simply points out that the choice of approach will depend on the characteristics of the agents involved.
22
However, some authors have identified that this conclusion is based on restrictive conditions, related to treating
utility as a linear function (KOHLSCHEEN; O'CONNELL, 2008, p. 3) and the absence of actual risk in the
definition of the pay-off (i.e. results not represented by lotteries) (ROTH; ROTHBLUM, 1982, p. 639; VOLIJ;
WINTER, 2002, p. 120), concluding that the effect could be none or even the contrary, greater risk aversion would
bring greater pay-off to the player.
13

A first point is summed up within the scope of bounded rationality23 that designates that
a rational choice “takes into account the cognitive limitations of the decision-maker –
limitations of both knowledge and computational capacity” (SIMON, 1987, p. 266).
This approach suggests the “correction” of the models by simplifying the payoff
function, adopting discrete values for what would be represented continuously, by correcting
the incompleteness of payoffs and by incorporating the information gathering, to consider its
cost and, therefore, for how long an agent can devote himself or herself to it (SIMON, 1955, p.
104 et seq.). Alternatives are also the development of a truly dynamic game theory (in which
players do not have the ability to predict how the entire game unfold –making a sequential game
similar to a simultaneous one), the use of the concept of rule rationality as opposed to act
rationality, i.e., rather than consciously maximizing in each decision, players use “general”
rules, and the incorporation of perturbations (trembling hand) or an “irrational” type of player,
among others (AUMANN, 1997, p. 6 et seq.), as well as including the possibility of errors, with
a small probability of occurrence, making the issue a case of “incomplete rationality”
(SELTEN, 1975, p. 34–35). The idea of errors as cause of irrationality has as a consequence
the possibility of learning in case of repeated games (BRAGA; STARMER, 2005, p. 56), which
would make the result converge to what was expected according to traditional theory after a
few rounds (CAMERER, 1997, p. 186).
Another group of criticisms related to bounded rationality addresses the issue of the
construction of preferences. Although it does not behave with restriction, and it is possible to
incorporate altruism or selfishness, preferences must meet some conditions or properties, in
order to enable their description by utility functions (BICCHIERI, 2004, p. 183). Preferences
should be complete (between two alternatives, A and B, A is preferable to B or B is preferable
to A, i.e. the agent always manages to decide), antisymmetric (when has A is preferable to B or
B is preferable to A, the agents will be indifferent between the alternatives), reflective (any
alternative is as good as itself) and transitive (if A is preferable to B, and B is preferable to C,
so A is preferable to C) (BICCHIERI, 2004, p. 184).
These limitations have both neurophysiological foundations, which restrict the ability
to accumulate and process information, as well as linguistic ones, and prevent individuals from
being able to store and process all the information necessary for better decision making.
23
This term has first appeared in Simon (1957, p. 198): “The alternative approach employed in these papers is
based on what I shall call the principle of bounded rationality: The capacity of the human mind for formulating
and solving complex problems is very small compared with the size of the problems whose solution is required
for objectively rational behaviour in the real world or even for a reasonable approximation to such objective
rationality”.
14

Several studies have shown, however, that preferences are not stable in relation to these
properties, but change depending on the context (e.g. FREDERICK; LOEWENSTEIN;
O'DONOGHUE, 2002; SLOVIC, 1995; TVERSKY; THALER, 1990). As Tversky and Thaler
point out (1990, p. 210):
First, people do not possess a set of pre-defined preferences for every contingency.
Rather, preferences are constructed in the process of making a choice or judgment.
Second, the context and procedures involved in making choices or judgments
influence the preferences that are implied by the elicited responses. In practical terms,
this implies that behaviour is likely to vary across situations that economists consider
identical.
In fact, the theory of rational choice, originally formalized by Savage (1954), is
criticized for adopting as an assumption the invariance of preferences, either in the form of
invariance by description, according to which the way information is presented to the agent
should not alter its decision, that is, “variations in a way that does not affect the results should
not affect the choice” (TVERSKY; KAHNEMAN, 1986, p. 253), or in the invariance by
procedure, which establishes that different methods of ordering preferences should not alter the
decision (SHAFIR, 1993, p. 553).
Deviations from invariance can be explained according to the framing effect, which can
be defined as “the decision-maker’s conception of the acts, outcomes, and contingencies
associated with a particular choice [and that...] is controlled partly by the formulation of the
problem and partly by the norms, habits and personal characteristics of the decision-maker”
(TVERSKY; KAHNEMAN, 1981, p. 453).
In relation to risk-related behaviour, for example, Bernoulli, in 1783, had already
pointed out how different people could have different behaviours in relation to the chance of
identical gains or losses: a rich man could decide to place a bet that a poorer would rather not
make, regardless the fact that the expected gain was the same for both (BERNOULLI, 1954,
24). However, Kahneman and Tversky (1979, p. 268–269) showed that the same agent could
exhibit different risk behaviours:
In the positive domain, the certainty effect contributes to a risk averse preference for
a sure gain over a larger gain that is merely probable. In the negative domain, the same
effect leads to a risk seeking preference for a loss that is merely probable over a
smaller loss that is certain. The same psychological principle – the overweighting of
certainty – favors risk aversion in the domain of gains and risk seeking in the domain
of losses.
Under the certainty effect, agents become risk averse if an alternative provides certain
gains and risk-prone if there is an option with certain losses. In particular, losses have greater
weight than gains for decision making (KAHNEMAN; TVERSKY, 1979, p. 279). This loss
aversion means that the agent has a different attitude in relation to the risk of gaining or losing
15

the same value, i.e., the possibility of gain does not compensate for suffering with the possible
loss (TVERSKY; KAHNEMAN, 1986, p. 258).
Another deviation that can lead to inconsistencies in the preferences ranking by agents
is identified as the isolation effect and occurs when individuals simplify alternatives they have,
disregarding common components and focusing on what differentiates them. However, as
alternatives can be decomposed in more than one way, different decompositions can lead to
different preferences (KAHNEMAN; TVERSKY, 1979, p. 271).
In addition to the deviations from rationality described above, the framing is associated
with other biases that impact decision-making processes, such as the endowment effect, which
causes people to demand more for one thing than they would be willing to pay for it (THALER,
1980, p. 44), the sunk-cost effect, the tendency to continue a venture because we have previously
invested time, money and effort in it (ARKES; BLUMER, 1985, p. 124), and the status quo
bias, the tendency of individuals to choose to do nothing or to maintain the current situation
(SAMUELSON; ZECKHAUSER, 1988, p. 8), even in the face of changes that could bring
them gains.24
To deal with these problems, Kahneman and Tversky proposed a different way of
dealing with decision-making under uncertainty. Their prospect theory is composed of two
stages: framing and editing, in which a preliminary analysis of possible choices (prospects) is
made, framing the effective actions, contingencies and results, and evaluation, in which the
choice of perspective that provides the greatest payoff to the decision-taker takes place
(KAHNEMAN; TVERSKY, 1979, p. 274–275; TVERSKY; KAHNEMAN, 1986, p. 257). This
method replaces probabilities with decision weights, which are inferred from choices between
prospects, but which “should not be interpreted as measures of degree or belief”
(KAHNEMAN; TVERSKY, 1979, p. 280). Because framing and editing depend on the context,
the same alternatives may have different order of preference according to the situation.
Thus, although the assumption of rationality may not always be adequate to the
analyses,25 the so-called “deviations” of rationality can be incorporated into the formal models,
in a Behavioural Game Theory (CAMERER, 1997, p. 185), by improving the methods of
24
We do not intend to exhaust the subject here, but it should be emphasized that there are other biases that influence
decision-making in a conflict resolution situation, such as optimism, attribution, impact etc. (KO, 2009).
25
With the caveat that discoveries from experimental economics, evolutionary psychology and neuroscience have
shown than “individuals – in the aggregate – are potentially and actually much more rational than behavioural
economists report from their laboratories" (FOKA-KAVALIERAKI; HATZIS, 2011, p. 38), which reinforces the
value of applying Game Theory even in its classic version, based on the rationality of agents.
16

identification of preferences (BRAGA; STARMER, 2005, p. 56; INFANTE; LECOUTEUX;
SUGDEN, 2016, p. 22).
As stated by Lecouteux (2013, p. 47), “there is therefore no reason to oppose
behavioural and neoclassical economics: since the former studies preferences, and the latter the
interaction of individuals once their preferences are given, they are complementary and not
substitute approaches to economic analysis”.
4 Applying Game Theory to the Analysis of Conflict Resolution Processes
From what was presented in the previous section, it is interesting to structure a

systematic approach for game modelling that allows integrating traditional and behavioural
concepts in a practical and coherent way.
Adapting what Camerer proposes (1997, p. 167–168), a three-step approach is indicated.
The first is the use of traditional Game Theory to develop a model capable of representing the
situation of interest in terms of its main points. Possible behavioural factors that would lead the
model to not offer adequate predictions should be considered afterwards and, finally,
incorporated to the model.
We will now present and discuss the points that should be considered in the elaboration
of Game Theory models that are useful for the representation conflict resolution processes
(conciliation or mediation), or CRP.
A game representing a CRP involves at least two parties who have to discuss the terms
of an agreement they deem fair and appropriate to resolve the dispute in which they are
involved. The approach suggested here is the modelling of an uncooperative bargaining game.
A CRP has characteristics of bargaining games (rivalry, communication, side-payments
– or parallel compensations, interdependence and uncertainty), so that it can be understood as
a game in which the collaborative solution corresponds to an agreement and the non-
collaborative one corresponds to leaving the decision to the Judiciary (COOTER;
RUBINFELD, 1989, p. 1069). Thus, the “three basic ingredients” of the bargaining game would
be present, according to Durlauf and Blume (2010, p. 1):
(a) the status quo, or the disagreement point, that is, the arrangement that is expected
to prevail if an agreement is not reached; (b) the presence of mutual gains from
cooperation; and (c) the multiplicity of possible cooperative arrangements, which split
the resulting surplus in different ways.
The point of disagreement (breakdown) represents what happens when the parties fail
to reach a consensus. One of the ways to deal with this situation was proposed by Nash (1953,
17

p. 130–131) and would consist of modelling the existence of a “threat” from each player to the
other. If there is no agreement, players will implement their threats (which, as pointed out
earlier, have to be credible). In the case of a CRP, it would not make sense to talk about a threat.
If an agreement has not been reached, the process evolves into the judicial stage. The models
should contemplate the possibility of breakdown at any time, since this is the reality of a CRP.
The issue of cooperation being mutually beneficial stems from the fact that the
breakdown is, a priori at least, unwanted because it implies a suboptimal solution for players.
This may not be true if one of the players uses the PCR as a delay tactic, for example. The result
in the event of disagreement is what will come from the judicial process. Thus, it is against this
result that players will compare the options accordingly. An agreement on a CRP will only be
possible if the parties believe that the payoff for this settlement outweighs the likely outcome
of the lawsuit (BLAKE; BROWNE; SIME, 2016, p. 7).
Some authors have pointed out that mediation and conciliation would be cooperative
games, because the parties would choose to cooperate and could abandon the process at any
time without any penalty (e.g. ALMEIDA, 2003). As already explained, this is not what makes
the game cooperative, but the existence of a mechanism that binds the parties to the cooperative
solution, which does not exist in the CRPs. Ignoring this can lead to a CRP wrongly conducted.
In mediation or conciliation as a stage of judicial proceedings, the agreement becomes binding
when it is reduced to term and approved by the judge, pursuant to Art. 334, § 11, of the CPC,
that is, at the end of the proceedings.26
Finally, the existence of multiple cooperative arrangements can complicate the solution
of the games, especially through the cooperative route, with their different concepts of solution
(MASCHLER, 2000, p. 3). It seems more appropriate to take advantage of the equivalence
between the cooperative and non-cooperative approaches27 and to use the latter. If multiple
balances still persist, a convergence solution should be sought based on the concept of focal
point presented above. One way of mediation to induce cooperation is by encouraging
communication between players, by helping them to coordinate expectations about the focal
point, which represents greater gains for all or at least for some of them. This support should
be based on criteria and principles that treat players with isonomy and are based on structural
aspects of the game that are relevant to decision-making (MYERSON, 1991, p. 372).
26
In the case of mediation, the sole paragraph of Art. 20 of Law No. 13,140/2015 establishes that “the final term
of mediation, in the event of conclusion of agreement, constitutes an out-of-court enforcement order and, when
judicially approved, judicial enforcement order”. This makes the hold-up improbable and provides security for the
implementation of agreements (see supra note 12 and accompanying text).
27
For a review of the cooperative bargain models, see Thompson (1994).
18

As Durlauf and Blume (2010, p. 256) point out, the non-cooperative approach provides
useful language and tools for analysing strategic situations, allowing the modelling of specific
details of the interaction that are relevant to the final result. However, as the authors mention,
its greatest imitation is precisely the sensitivity of the predictions to the parameters adopted to
represent these details. Thus, when there is greater uncertainty as to the value of a parameter,
an alternative would be to perform a sensitivity analysis in relation to it, verifying how the
decision of the agent changes as a function of parameter variation, and/or identifying the limit
values of this parameter that would lead to the different choices if the agent (i.e., for which
parameter values the decision changes).
In view of the way the CRP is conducted, in which the proposals are submitted by a
party for subsequent consideration by the party, the sequential bargaining modelling,
inaugurated by Ståhl (1972) and Rubinstein (1982), seems to be the most appropriate, as it is
concerned with the details of the negotiation (DURLAUF; BLUME, 2010, p. 256), that is, with
the bargaining process itself.28
Defined the overall structure of the game, players and their characteristics should be
described. Should modelling include the mediator/conciliator as a strategic player or not?29
Since the mediator/conciliator can interfere in the dynamics between players and change the
incentives with their performance, if he himself has the appropriate incentives to perform his
task effectively and efficiently, his inclusion as a strategic player is recommended. Next, what
is the level of impatience of each of the players? It should be evaluated whether they are
common knowledge or are private information (MAOR; SOLAN, 2015, p. 322). Will the party
use the money to pay off debts, for example? Or will he invest? The interest rate on the debt or
possible application would be ways to estimate this impatience. An excessive difference in the
level of impatience between players can approximate the situation of a zero-sum game, as the
gain of one part with the delay in the resolution will correspond to a loss to the other. In addition,
what are the behaviours towards risk? Assessing the level of income and the proportion of value
under discussion in relation to equity can help clarify any differences between the parties.
28
In general, bargaining models assume that once a proposal is accepted, it is implemented, with no right of
repentance to the proposer. This assumption may, however, be relaxed, as shown in Muthoo (1990, p. 292).
However, in view of the procedure applied to the PRC in the judicial sphere, it does not seem necessary to
incorporate this detail.
29
A non-strategic player is called nature in the terminology of Game Theory and its movements, called “states of
nature”, represent alternatives to events or types of players that a strategic player is unaware of when deciding
which action to take. The vast majority of bargaining games do not involve the mediator/conciliator. Among the
works in which a third party is a strategic player, we highlight Bastianello and Licalzi (2019) and Lehrer,
Rosenberg and Shamya (2010).
19

It is then necessary to analyse which are the possible actions for each player. Proposals
that can be submitted and values that, if presented by the other party, would be accepted. The
payoffs for each combination of moves must be estimated. In general terms, Chatterjee and
Samuelson (2014, p. 193) state that the level of competitiveness affects the evaluation of
payoffs in a bargaining situation because it can change the BATNA (Best Alternative to a
Negotiated Agreement) of each player: if one of them has interesting alternatives to the
negotiation, the disagreement will not result in a significant loss.
However, as already mentioned, in the case of a CRP where there is no agreement, the
alternative will be the progress of the conflict to the judicial stage. Thus, it is necessary to
evaluate the expectation of the parties in relation to the outcome of the judicial process (these
will be their BATNAs). Are they similar or not? Do any of the parties have more experience in
this type of litigation? If the parties have the same information about the likely outcome of the
dispute, there is symmetrical uncertainty and players will estimate identical amounts as to the
judge’s decision, but if one of them has private information about the judicial process, not
available to the others, there will be asymmetry of information. While symmetric information,
in the absence of other relevant differences between players, allows us to conclude that they
will reach an agreement (CHATTERJEE; SAMUELSON, 2014, p. 210), asymmetry can make
it difficult to achieve this goal.
From the above evaluation of the types of players involved thus arises a game of
incomplete information. Private information and the impossibility of binding commitments
between the parties, even if considered strictly rational, can generate situations of adverse
selection and moral hazard. These are problems that the CRP can help mitigate (BROWN;
AYRES, 1994, p. 393). Adverse selection and moral risk30 result from the asymmetry of
information, before the agreement is made, about the type of player, in the first case, and after
its implementation, about the behaviour that will adopt, in the second case. In the case of CRP
in the judicial sphere, the enforceability of the approved agreement would reduce moral hazard,
however the concern with adverse selection remains. The neutral third party, mediator,
conciliator or judge, may intervene in order to reduce the asymmetry of information by
transferring information between the parties, in order to enable them to signal their
characteristics, e.g. their BATNAs, and thus that each can elaborate more precise beliefs about
30
Risk moral definition has an economic definition that is not related to a legal definition of morality. The term
moral hazard originated in insurance studies. The modern use used by economists describes the behaviour of one
of the parties after interaction with the other, or the lack of incentive for self-care after the conclusion of insurance
(ROWELL; CONNELLY, 2012, p. 1051).
20

the others, to facilitate reaching a solution (LEHRER; ROSENBERG; SHMAYA, 2010, p.
675).31
Once the model is built under the traditional bases, the next step of the structure
proposed in the present work is the evaluation of the different psychological biases that the
players could present, in order to incorporate them into the model.
Here, a neutral third party also has the potential to aid in the modification of equilibrium
if the parts bump into cognitive biases. As Ko (2009, p. 204) suggests, a mediator should try to
eliminate or reduce the influence of any biases to help the parties objectively assess the situation
and find a solution they understand fair or minimally acceptable.
As seen in the previous section, these corrections may occur by the relaxation of the
assumption of rationality, with the incorporation of the possibility of “errors” by the players,
and reordering of preferences, with Kahneman and Tversky’s prospect theory, for example.
Different models allow the incorporation of other values, such as justice and altruism, and to
deal with issues such as ambiguity, commitment and reciprocity (ANDREONI; RAO;
TRACHTMAN, 2017; BOLTON; OCKENFELS, 2000; DUFWENBERG; KIRCHSTEIGER,
2004; FEHR; SCHMIDT, 1999; GUL; PESENDORFER, 2001; KREPS; PORTEUS, 1978), as
well as cognitive biases that impact how agents perceive the game and their ability to cope with
its complexity, including aspects such as memory, learning and interdependence of preferences
(EYSTER; RABIN, 2005; GUL; PESENDORFER, 2006; KAHNEMAN; TVERSKY, 1979;
KŐSZEGI; RABIN, 2006; PICCIONE; RUBINSTEIN, 1997).
It should be emphasized that the concern should not be with a complete modelling, but
one that includes the relevant details for the situation and agents that are being represented.
Game Theory is not only relevant when it allows accurate predictions of results for real
negotiations, but because it provides a greater understanding of the behaviour of agents. As
Chatterjee and Samuelson stated (2014, p. 203, our translation):
By its very nature, the theory is contingent and points out that even seemingly minor
differences in a given negotiating situation can dramatically change the nature of the
game being played. And the theory also suggests the direction of such a change and
what one might do about it. There is nothing that can replace careful study and
preparation for a negotiation. Knowledge of the theory provides categories for
classifying the material one has about a situation and for analyzing the contents.
31
There is a vast literature that models agreements in legal proceedings (e.g., BASU, 2012; COOTER;
RUBINFELD, 1989; DAUGHETY; REINGANUM, 2012; SPIER, 2007), as well as on bargaining games with
incomplete information (e.g. BINMORE; OSBORNE; RUBINSTEIN, 1992; CHATTERJEE, 1981;
CRAWFORD, 1982; FORGES, 2020; HARSANYI; SELTEN, 1972), which can assist the construction of the
models.
21

Thus, in a normative perspective of conflict resolution processes, the goal should be to
take advantage of the answers and insights provided by Game Theory to transform the
collaborative choice into a Nash equilibrium for that situation. In other words, in a way,
redesign the conflict resolution process so that agents have no incentive to change their
decision, i.e., so that the parties do not want to fail to reach the agreement (WIDENER, 2012,
p. 113).
5 Game theory in the Judicial Conflict Resolution Process

The conflict can enter the judicial phase, with the presence of a judge, bringing the
possibility of a judicial trial and imposition of an unnegotiated solution.
By initiating the judicial phase, which implies that the negotiation in the previous phases
has not been successful, each party of the conflict will intend not to cooperate and also not to
believe in the other parts of the interaction because at least one of the parties will believe that
they will receive a greater payoff at the end of the trial.
The judge or conciliator may act in such a way as to establish trust between the parties
to induce cooperation.
At this stage, the use of Game Theory is useful and motivated by the understanding that
the judicial process has a strategic dimension. Lawyers and judges understand that the trial will
bring reactions from the parties and may result in the pacification of the conflict or in an attempt
to reverse the trial in higher courts. In this context, in order to achieve the best judicial
interpretation of the law and its application in the conflict, it is necessary to try to predict the
agents’ responses to the judicial trial.
Even though it is impossible for the modelling of this interaction to encompass all the
complexities of the trial, the analysis based on the Game Theory is useful for a more elaborate
development of conciliation and for the progress of the judicial process.
With the conflict in the judicial phase, it is also possible to structure a systematic
analysis of the game to allows the identification of the strategies of the parties so that the
solution of the conflict, by agreement or judgment, is quick and efficient.
Judges can encourage litigants to bring in new information for interaction, since they
have private information about their own position in the event of trial and can signal to the
parties, in a credible way, what are the chances of success and failure in the case in dispute.
In cases that could be heard by more than one judge, this information is more frequent,
in contrast to the ancient and traditional view of judges who acted passively only by receiving
arguments brought by the parties and then producing judgment in isolation.
22

The science of conflict resolution in the judicial phase recognizes a change in the role
of judges, as they start to lead the management of the process and incentives to the parties to
seek more friendly conflict solutions, besides having decision-making power. As Resnik (1982,
p. 378) states:
As managers, judges learn more about cases much earlier than they did in the past.
They negotiate with parties about the course, timing, and scope of both pretrial and
posttrial litigation. These managerial responsibilities give judges greater power. Yet
the restraints that formerly circumscribed judicial authority are conspicuously absent.
Managerial judges frequently work beyond the public view, off the record, with no
obligation to provide written, reasoned opinions, and out of reach of appellate review.
All these elements of Game Theory can be identified in order to confer greater efficiency
in the resolution of the conflict.
Klein, in Austria at the end of the 19th century, proposed a model of judicial resolution
of conflicts concerned with speed and effectiveness and for this suggested a greater
approximation of the subjects of the process and greater interaction of the parties (SILVA, 2010,
p. 108).
The conduct of the process occurs with the interaction between the judge and the parties
of the process, interactions that are continuously repeated, encouraging cooperative behaviour.
This method of action during the judicial process is the current interpretation of the principle
of adversarial proceedings, which gives the parties and the judge a more active role in the
conduct of the conflict (GOUVEIA, 2009, p. 32). In the same way, the German doctrine called
arbeitsgemeinschaft supports the participation between judge and parties, stating that this
interaction decreases the duration of the process (BENDER; STRECKER, 1978, p. 554).
There is no more distance and inertia of the judge in relation to the parties, who act more
actively, and all must act together. This performance implies repeated interactions between all
and can be helped with the use of Game Theory in the modelling of how agents act in the face
of conflict.
Cooperation between parties and judge leads the latter to take the same level as the
parties during the proceedings, a relevant part of the formation of a fair decision. However ,if
an agreement is no met, the judge has then to take a more distant position from the parties, to
conduct the trial.
With these interactions, Game Theory can be used to understand the payoffs (positive
or negative, i.e., punishments) in the judicial process, as well as the greater or lesser impatience
of the parties, which will directly influence the duration of the proceedings.
The parties and the Judge may avail themselves of stimuli present in the procedural
legislation that include fines, anticipation of the effects of the judgment and evidential
23

presumptions. The identification of payoffs and the possibility of punishment permits strategic
actions of lawyers and the judges, in order to use these procedural mechanisms as credible
threats or promises to influence the impatience and final payoff of each party in the conflict.
For Elster (2015, p. 202 et seq.), the analysis of the payoffs of each party is formed from
the evidence available at the beginning of the conflict. Thus, with the progress of the process
and nodding beginning of the judicial phase, this analysis can be reviewed. This process,
Bayesian learning, means that, after an initial estimate, the aggregation of new information by
the actions of the parties and the performance of the judge lead to a more reliable estimation of
the payoffs.
If the parties adopt a collaborative strategy, in which the objective is to achieve the best
for each and for the other participants, it is possible to maximize the gains for all during the
course of the process. It is up to the parties and the judge, using the procedural possibilities
mentioned, to induce cooperative behaviour in the participants of the conflict, in order to reduce
the remarkably high resolution time and costs in the judicial phase.
In lawsuits involving two or more individuals acting on their own interests, Game
Theory is useful to identify better means of interaction for each party.
In collective proceedings, on the other hand, the right under discussion does not belong
to the parties (e.g., public prosecutor, public agencies, association etc.), so that there may be no
payoffs and punishments for them. The right is actually held by the people they represent in
court (e.g., consumers, people affected by harmful events etc.), who will bear any gain or loss.
In such situations, Game Theory may show a more efficient mean to conduct the procedure for
the solution of the collective conflict, reaching agreements or abbreviating the CRP.
6 Concluding remarks
Without a strategic approach, mediation, conciliation and acting in the judicial phase
may become mechanical procedures, in which the neutral third party mediates an exchange of
ill-built proposals (WIDENER, 2012, p. 132) or in which an adversarial posture prevails,
threatening the implementation of agreements and the celerity and effectiveness of the conflict
resolution process in general.
Game Theory, as “a rational decision theory in conflict situations” (RAPOPORT, 1974,
p. 1), allows a structured and scientifically sound modelling of situations involving negotiation
and the simultaneity of convergent and divergent interests, which represents a fundamental
complement to the traditional legal doctrine, especially in civil law countries such as Brazil.
24

The work had a first objective of accurately presenting the terms and concepts of Game
Theory, clarifying some confusion that we perceive occur when the subject is treated outside
the scope of Mathematics and Economics, specifically in Law.
The main issues that should be considered, based on the main studies that raised and
evaluated them, were also presented in the construction of models on conflict resolution. The
bibliography mentioned is not intended to be exhaustive but to serve as the basis for the
application of Game Theory to conflict resolution processes. Some do not deal with bargaining
games, but pre-judicial settlements, usual in common law jurisdictions, and some use
cooperative modelling, but all provide insights into details that can be incorporated into non-
cooperative modelling of negotiation interactions, such as mediation and conciliation. Despite
the focus on the civil sphere, the extension to criminal law seems entirely plausible, as does the
application to other conflict resolution processes, such as arbitration.
Game Theory can undoubtedly help the analysis of conflict resolution processes and the
performance of the mediator, conciliator, judge or lawyer, and the approximation between the
agents involved and the results brought by the various studies, theoretical and empirical, should
be encouraged.
Mathematical modelling games certainly seems more complex, and this can drive Game
Theory away from those refractories to the use of quantitative tools. However, it should be
emphasized that Game Theory is useful even when, due to simplifications or computational
difficulties, one does not want to make a strict prediction about the decision of the agents, but
obtain qualitative indications about their behaviour (CHATTERJEE; SAMUELSON, 2014, p.
203) that can assist the neutral third party. The mediator, conciliator or judge will undoubtedly
be better able to act during the proceedings by being able to understand which game is, in fact,
taking place between the parties (LIMA, 2018, p. 529).
Getting to know the game and the participants, the agents, be they mediators,
conciliators or judges, be they policy makers involved in the elaboration of regulation or
standards for conducting conflict resolution processes, may follow the advice of Nalebuff and
Brandenburger (2002, p. 67)32 that “chang[ing] the game is the essence of the strategy” to
change the incentives involved and make fast and satisfactory agreements possible and avoid
the opportunistic use of mediation and conciliation and the judicial process itself as delaying
tactics, contributing to an effective and rapid access to justice.
32
Originally, the authors refer to the strategy of businesses (“changing the game is the essence of business
strategy”), but we believe the suggestion is also valid for strategy in other fields, such as political and legal.
25

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GAME THEORY AND CONFLICT RESOLUTION

Reinaldo Diogo Luz*

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2 General Aspects of Conflict Resolution Processes

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3 Relevant Concepts of Game Theory for Conflict Resolution

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4 Applying Game Theory to the Analysis of Conflict Resolution Processes

From what was presented in the previous section, it is interesting to structure a

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5 Game theory in the Judicial Conflict Resolution Process

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