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  • Writer's pictureJohn Bickerman

Reframing: A Lesson in Loss Aversion

As any casual political observer knows, politicians are constantly in the business of casting events in the light most favorable to them. While some commentators describe this as “branding,” a better term for negotiators and mediators would be reframing. Reframing is a technique that good mediators use to great effect to help parties overcome a major psychological barrier to settlement.

We begin with the important observation that people, and especially negotiators, are inherently irrational to some degree. One of the clearest ways in which this irrationality is demonstrated is known as “loss aversion.” While risk aversion is a readily understood concept, loss aversion is less understood. Most people, except maybe chronic gamblers, are risk averse. Given a choice between a sure thing or a gamble that might pay out a higher return but comes with the possibility of a loss, most people will take the sure thing. This is one reason why mediation is so successful. It provides the “sure” thing in the form of a settlement instead of leaving the outcome to a stranger — e.g. the court or an arbitrator. A sure thing is preferred to uncertainty.

Loss aversion is the complement to risk aversion. People will go out of their way to avoid a result that they perceive as a “loss”. If a potential outcome is a loss, then most people will gamble to avoid a loss even if the likelihood of prevailing on the gamble is worse than the cost of the loss. A classic example is the gambler at the blackjack table on a losing streak, doubling down on his bets believing that his luck will change with the next set of cards. He is irrationally motivated to avoid a greater loss although rationally his likelihood of winning is exactly the same as before.

So this is where the experienced mediator can take advantage of the technique of reframing to overcome loss aversion. If a mediator appreciates that a party is going to perceive an outcome as a loss, then she may try to reframe that outcome not as a loss but as a win by highlighting the potential benefits of a settlement. While reframing cannot work in all situations, especially in true zero-sum negotiations, it is effective where there are other aspects of the settlement that could be interpreted as a win.

Reframing is one of the most powerful techniques a mediator can use to overcome one of the most pervasive psychological barriers that interfere with parties reaching rational settlements and should be included in the toolbox of every negotiator and mediator.

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