When National Hockey League Commissioner Gary Bettman told reporters at the end of December that a labor agreement needed to be in place by Jan. 11 in order to have even an abbreviated season, it became almost inevitable that a deal would happen near that date. Bettman had set a deadline, and, as a rule, win-lose negotiations don’t get done without one. So yesterday’s news that the season was not lost, while welcome for hockey fans, was an anticlimax. Owners and players had spent 113 days and sacrificed 625 games to reach the 50-50 split that the owners had proposed in October. All the while, they built ill-will among fans who wanted nothing more than to fork over cash to watch hockey. The NHL went through almost exactly the same routine in 1994-95, ending a lockout on Jan. 11. The National Basketball Association did their rendition in 1998-99, salvaging a 60-percent season on, wait for it, Jan. 6. In search of a better way, I called Don A. Moore of the University of California Berkeley Haas School of Business. Moore is a negotiation and deadline expert who has written about the NBA’s 1998-99 lockout.
First of all, why does it always happen this way?
The dynamics we see arise because each side has the motive to pretend to be patient. Even if they are bleeding red ink, even if they are in a cash-flow crunch and they want nothing more than to make a fast deal, they want to make the other side think they’ve got plenty of time. So we get these really perverse situations, as we’ve seen here with the NHL, where they draw things out. And you get these tragic losses that basically end up hurting everybody. It’s just dumb. It’s inefficient.
Isn’t there some mechanism that could move the end-game up so we don’t lose half-seasons?
Thomas Schelling won the Nobel Prize for his innovative analysis of problems exactly like this. Let me tell you his advice for playing the game of chicken. He says that the problem for players is that they have too much freedom. You want to have a car where you can throw the steering wheel out the window, thereby eliminating your choice of chickening out, thereby force the other side to chicken out. That’s the sort of commitment that one side or the other in the negotiation would have to make to make a deadline credible.
Okay, so how do we throw the steering wheel out the window? Or is there no getting around this?
It’s really difficult. There are solutions out there. One that is quite clever comes from a negotiation scholar at Harvard, Jim Sidanius. He proposed that when you’re facing a potential strike, you first figure out how much each side benefits from the continuation of the status quo and how costly it would be to each side if there was a strike. Then you use that to compute strike penalties. The day that a strike or lockout would have started, you start incurring those penalties, but you don’t actually stop servicing your customers. You don’t stop playing. The negotiations continue, but each side has to pay into a penalty fund all of the benefits that they would be foregoing in case of a strike or a lockout. So it’s costly to each side and each side wants to see a deal happen, but you aren’t alienating your customers and undermining the viability of your business while the two sides are fighting about how to divvy up the goodies that their work creates. Once you’ve made a deal, then you can talk about how to divide up that money.
But if they know that money is coming back to them eventually, doesn’t that take away the pressure?
It does. If the season goes on and they keep playing, there is much less attention to the conflict and it’s less likely to force action. That’s part of why nobody has actually implemented this brilliant plan.
What if there was no recouping it?
Yeah, give it away. Donate it to fans or to charitable causes. That would get them such great press, as opposed to enraging their fans. Both sides would like the other side to commit to such a plan, but they certainly aren’t going to.
