Bargaining Ethics

Q. Is it permissible to bluff in negotiations?

A. I have been asked this question many times, and I have always had difficulty formulating a convincing response. However, I am going to present here a fascinating analysis of the question by Rabbi Dr. Aaron Levine of Yeshiva University. Rabbi Levine's insights have been frequently quoted on this site. His new book Moral Issues of the Marketplace in Jewish Law includes an extensive section on the important yet neglected topic of negotiation ethics. In my opinion, this chapter is an important contribution not only to Jewish ethics but also to the entire business ethics literature.

The context of his discussion, and one of the most common bargaining situations, is labor-management negotiations, so we will present his insights in this context.

In this chapter, Rabbi Levine makes some very interesting and useful distinctions among various kinds of bluffs or untruths.

Rabbi Levine points out that a person can lie in negotiations for a variety of reasons. Commonly, one side may face an acceptable offer (one that would be accepted if it were truly a take-it-or-leave-it situation) and try to portray it as unacceptable (threatening a strike when in fact the negotiator knows the rank and file would actually accept the offer). But sometimes one may accurately present an offer as unacceptable but mislead as to the reason. In particular, claiming that "we would like to meet your demand but we are unable to" is less alienating than stating "your offer is unacceptable to us," even if the latter statement is true.

Rabbi Levine views such a claim as a kind of white lie. Jewish law permits occasional white lies to sustain good-will and avoid embarrassment; for example, telling a visitor that "Joan is sleeping" instead of saying "Joan has an important phone call." The latter answer could insult the visitor by making him think that he is being turned away for an inadequate reason (even though the phone call truly is very important), and saves Joan from unnecessary intrusion into her privacy. ("What could Joan be talking about that's so important?!")

Here also the object is to sustain good will by making a more conciliatory explanation for rejecting a demand. But even a "white lie" is an affront to truthfulness and so is subject to many restrictions: there must be no other way of keeping good will; it must not be a lie which will ultimately be revealed and cause even more ill-will; and it must not be made in a way which habituates a person to untruth.

Rabbi Levine's example is a university negotiator who doesn't want to be blunt and say "I'm sorry, you guys are just not worth that much to us." He shouldn't say "There is no money in the current budget" if this is not true, even if the budget is currently under wraps, since ultimately the budget will be publicized. But stating "we can't raise tuition enough" to meet the demand may be acceptable, if the decision on tuition is known only to a handful of administrators who will not reveal the decision they made.

What about an actual threat to strike? If the administration's offer is truly unacceptable, then of course there is nothing wrong with threatening a strike. What about an offer which, if push came to shove, the faculty would accept? Can the negotiator threaten a strike in order to intimidate the administration into making a better offer?

Here Rabbi Levine distinguishes between two kinds of false threats: credible threats and transparent threats. If the context of the negotiations is such that the other side will actually believe the threat, then he writes that such a threat is a bad faith negotiating ploy. But if the context is such that the other side perceives that the threat is merely a kind of exaggeration for effect, then there is no prohibition.

The basis in Jewish law for this understanding is in the laws of vows. If a person swears that he will not accept less than a certain amount for his merchandise, then of course the oath is binding. But some people, unfortunately careless with their oaths, use the term "I swear I won't" as a convenient translation of "I would be reluctant to", and everyone is aware of this. Sometimes mention of a strike is made to signal to the other side that he is getting into a sensitive area without actually meaning to put an end to negotiations; if the other side understands that this is a "caution threat" this is ethical. But according to Rabbi Levine's analysis, an outright false threat is a bad-faith ploy.

Rabbi Levine's chapter includes many other fascinating ethical distinctions, including discussions of the ethics diversionary statements, ultimatums, exaggeration, and false "decoy" demands. He even discusses hostage negotiations. I have never encountered such a comprehensive and convincing treatment of the ethics of negotiations in any work, Jewish or general.