Restructuring Strategy: Nash Meets Lorenz and Freud

Richard Marney () and Timothy Stubbs ()

Chapter Chapter 10 in Emerging Markets Debt Restructuring, 2024, pp 443-471 from Springer

Abstract: Abstract This chapter acknowledges that the negotiation phase of every restructuring is different and does not conform to a single strategy or approach, given each deal’s unique characteristics, context and evolving behavior of the stakeholders. A standardized strategy is impractical. The classroom application of Nash and Game Theory must give way to a pragmatic approach that recognizes not just this uniqueness, but also the highly dynamic and unpredictable nature of each step in the negotiations. Hence, the spirit of Lorenz and chaos theory are more relevant to our efforts than the formalistic rigor of Nash. Lastly, people negotiate, and their behavior is not always rational and consistent. Emotion can easily quash (financial) logic, as studies of human behavior confirm (Freud and others). All of the foregoing taken together leads to the conclusion that successful negotiators recognize that the process can easily appear chaotic and must be managed accordingly and that an understanding of the personalities sitting (or standing and shouting) on the other side of the table is key. To demonstrate this, the chapter walks through the four cases and the three counterfactual scenarios for each (in the section entitled Personalities and Context—Expect the Unexpected), to highlight how changing circumstances may create different and unexpected trajectories (the Chaos Theory angle) but may themselves to an evolution in tactics (the Game Theory angle), but always recognizing the role of personality issues and individual actions, which can easily throw the whole process into a chaotic state.

Keywords: Strategy; Game theory; Chaos theory; Behavioral psychology; Personality; Decision-making; Decision tree; Sequential games; Butterfly effect; Negotiating personality types; Trusted party; Consensus builder; Big-picture thinker; Technical expert; Morality preacher; Smartest person in the room; Doubting thomas; Invisible man; Bully – terrorist; Kamikaze; Double agent (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-66838-8_10

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DOI: 10.1007/978-3-031-66838-8_10

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