ECONOMY

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Solving for x gives x =8/15 = 0.533. This means that the executive will win about
53 per cent on salary, and the company will lose about 53 per cent (i.e. win about
47 per cent), which is almost a 50–50 compromise between the low and high figures
they negotiated earlier, only slightly favoring the executive.
This compromise ensures that both the company and the executive will end up
with exactly the same total number of points after the equitability adjustment:
40 + 35(.533) = 80 − 40(.533) = 58.7.
On all other issues, either the company or the executive gets its way completely (and
its winning points), as it should since it valued these issues more than the other side.
Thus, AW is essentially a winner-take-all procedure, except on the one issue on
which the two sides are closest and which, therefore, is the one subject to the equitability
adjustment. On this issue a split will be necessary, which will be easier if
the issue is a quantitative one, like salary, than a more qualitative one like title and
responsibilities. 7
Still, it should be possible to reach a compromise on an issue like title and responsibilities
that reflects the percentages the relative winner and relative loser receive
(53 per cent and 47 per cent in the example). This is certainly easier than trying to
reach a compromise on each and every issue, which is also less efficient than resolving
them all at once according to AW. 8
In the example, each side ends up with, in toto, almost 59 per cent of what it desires,
which will surely foster greater satisfaction than would a 50–50 split down the middle
on each issue. In fact, assuming the two sides are truthful, there is no better split for
both, which makes the AW settlement efficient.
In addition, it is equitable, because each side gets exactly the same amount above
50 per cent, with this figure increasing the greater the differences in the two sides’
valuations of the issues. In effect, AW makes optimal trade-offs byawardingissues
to the side that most values them, except as modified by the equitability adjustment
that ensures that both sides do equally well (in their own subjective terms, which
may not be monetary). On the other hand, if the two sides have unequal claims or
entitlements—as specified, for example, in a contract—AW can be modified to give
each side shares of the total proportional to its specified claims.
Can AW be manipulated to benefit one side? It turns out that exploitation of the
procedure by one side is practically impossible unless that side knows exactly how
the other side will allocate its points. In the absence of such information, attempts at
manipulation can backfire miserably, with the manipulator ending up with less than
the minimum 50 points its honesty guarantees it (Brams and Taylor 1996, 1999b).
While AW offers a compelling resolution to a multi-issue dispute, it requires careful
thought to delineate what the issues being divided are, and tough bargaining to
⁷ AW may require the transfer of more than one issue, but at most one issue must be divided in the
end.
⁸ Aprocedurecalledproportional allocation (PA) awards issues to the players in proportion to the
points they allocate to them. While inefficient, PA is less vulnerable to strategic manipulation than AW,
with which it can be combined (Brams and Taylor 1996, 75–80).