for insurance settlements and other money transfers
We can use the example of an insurance settlement where there has been a car wreck and liability has been clearly established. Both parties agree the insurance company (B) must pay the injured party (A) a sum of money but of course, A wants more and B would like to pay less.
As our inspirational model, we use the two-kid candy bar dispute. Both want the candy bar and have agreed to split it. The fairest way is for one to cut the thing in half and the other gets to pick which half he wants. Do you see the inherent logical fairness of this? That's the kind of thing we're looking for here.
If the insurance company offers you $100,000 and you were hoping for $50,000 ... you get paid $75,000. You win because you get more than you thought was fair. The insurance company wins because they pay out less than what they thought they were going to have to pay.
If the insurance company low-balls you at $37,500 (minimum 75% of your tender) ... you're not too far off your figure - a settlement of $43,750 is just 12.5% short of $50,000 which isn't all that bad. And the insurance company isn't out a whole lot more becasue they've got to pay out just 7/6 times their tender of $37,000 which would be that same $43,750. These are the maximum shortfalls on either side. I chose 75% because I wanted the window of settlement oppotunity to be maximized but the potential loss to each party minimized so that each could go into the process with the assurance that his loss would not be so great as to prevent agreement on this course of action.
You know, going into the process that you will not come away with less than 87.5% of what you asked for. And the insurance company goes into the process knowing that they will not lose more than 16.66% of what they were willing to pay. But they both could come away much better off than they thought possible and ... not pay ... the lawyer's fee as well.
Note that each party has a vested interest in keeping the issue out of court when the facts are very clear in a case. By settling out of court they cut out the lawyer's fees and save the time and hassle associated with court interactions. Of course, the lawyers would be agressively opposed to this tactic and would say that the insurance companies will take unfair advantage of the claimants inexperience. Yes ... they will if they can ... but you can study the issue for a few weeks just like you study car prices before buying and go into the 75% solution process with confidence that you won't get too badly screwed and you could make out very well alternatively.
The insurance company will not want to low-ball your tender if possible. They're not going to tender $0 when they know they must pay out eventually. They can figure a fair settlement too and get on with other business.