A classic dope fiend move, negative contracting is an agreement between two parties permitting inappropriate conduct by both. The simplest version occurs when parties violate standards or rules set by a third party. Consider two dirty cops, each of whom discovers that the other is engaging in illegal conduct. They have three options available: (1) turn each other in; (2) cease their illegal conduct, but keep quiet about past misdeeds; or (3) enter into a mutual agreement allowing each to continue his nefarious ways undisturbed. Options 2 and 3 are examples of negative contracts.

A more complex version occurs when the parties are engaging in conduct harmful to the other party in the contract. A paradigm example is a young couple that has broken up, but continues to make incessant booty calls. Both are using the other purely for sex, and each is inflicting harm on the other, but each permits the negative conduct to continue in order to achieve a desired goal, in this case sex. A similar, if more jaded, example involves an older married couple, each of whom is having an affair. Although they each know the other is cheating, they permit the negative conduct to continue in order to achieve a desired goal, in this case sex. Or did I just say that?

The third, and most neurotic, version of a negative contract occurs when each party allows the other to engage in self-harm. OK, maybe an example would be good. Consider a married couple. The husband eats too much, but the wife doesn’t complain about it because he lets her drink too much. They’re both happy, or at least they think they are.

In the end, negative contracting yields negative results. Or in the language of game theory, it results in a suboptimal equilibrium.

BrevityQuest 2007

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