War Of Attrition
Signing Bonus Spiral
Signing Bonus Spiral is a War Of Attrition scenario. The core lesson: When two parties in a prolonged negotiation each wait for the other to concede, and both are incurring real costs each month the deal stays unsigned, they are in a war of attrition. The rational move is to settle, but neither wants to be the one who blinked. A regional health system and an independent hospitalist group have been negotiating a new employment agreement for eleven months. Base compensation and call coverage terms are resolved. DecisionPlay maps the players, payoffs, and equilibrium dynamics that shape how this situation typically resolves.
The situation
A regional health system and an independent hospitalist group have been negotiating a new employment agreement for eleven months. Base compensation and call coverage terms are resolved. The remaining gap is a signing bonus for new physicians joining the group: the health system's last offer was $20,000 per physician and the group's last counter was $32,000. Legal fees and administrative hours are accumulating monthly. Four hospitalists have accepted locum contracts while the permanent agreement remains unsigned. The CFO has asked for a recommendation on whether to hold or close.
Background
Prolonged contract negotiations in healthcare often follow a war-of-attrition structure. Each party continues holding out because they believe the other will concede first, each round incurring costs in staff time, legal fees, and operational friction. Both parties would have been better off settling at any earlier point than continuing. The monthly cost of the impasse, locum premiums, legal billing, and recruiting delays, consistently exceeds the present value of the gap being contested. But the party that concedes first believes they are signaling weakness for the next contract cycle.
What this reveals
Why contract standoffs outlast the math
War-of-attrition negotiations persist because each party is paying a monthly cost they believe the other will stop paying first. The logic breaks down when the monthly cost of the impasse is larger than the value of the contested terms. At that point, continuing to hold is not negotiation strategy; it is sunk-cost reasoning dressed as leverage. The CFO's question is the right one: model the monthly cost and compare it to the value of the gap. The answer usually points clearly to settlement.
How to counter it: Before the next negotiation session, build a month-by-month impasse cost model and share it with the counterparty. Naming the mutual cost of holding out often breaks the dynamic faster than any new offer does.
A question to sit with
In a current or recent negotiation in your organization, what is the monthly cost of the impasse, and how does it compare to the value of the remaining gap?
Frequently asked questions
- What game theory concept does Signing Bonus Spiral illustrate?
- Signing Bonus Spiral illustrates War Of Attrition. When two parties in a prolonged negotiation each wait for the other to concede, and both are incurring real costs each month the deal stays unsigned, they are in a war of attrition. The rational move is to settle, but neither wants to be the one who blinked.
- What is the situation in Signing Bonus Spiral?
- A regional health system and an independent hospitalist group have been negotiating a new employment agreement for eleven months. Base compensation and call coverage terms are resolved. The remaining gap is a signing bonus for new physicians joining the group: the health system's last offer was $20,000 per physician and the group's last counter was $32,000.
- What does Signing Bonus Spiral reveal about how people decide?
- Why contract standoffs outlast the math. War-of-attrition negotiations persist because each party is paying a monthly cost they believe the other will stop paying first. The logic breaks down when the monthly cost of the impasse is larger than the value of the contested terms. At that point, continuing to hold is not negotiation strategy; it is sunk-cost reasoning dressed as leverage. The CFO's question is the right one: model the monthly cost and compare it to the value of the gap. The answer usually points clearly to settlement.
- How do you avoid the trap in Signing Bonus Spiral?
- Before the next negotiation session, build a month-by-month impasse cost model and share it with the counterparty. Naming the mutual cost of holding out often breaks the dynamic faster than any new offer does.
- What is the research behind Signing Bonus Spiral?
- Prolonged contract negotiations in healthcare often follow a war-of-attrition structure. Each party continues holding out because they believe the other will concede first, each round incurring costs in staff time, legal fees, and operational friction. Both parties would have been better off settling at any earlier point than continuing.
- How long does Signing Bonus Spiral take to play?
- About 9 min, at advanced difficulty, across 1 decision points. It runs in your browser with no account and no sign-in.
Keep exploring
More Healthcare Ops scenarios, or browse all scenarios. New to this? Start with how DecisionPlay works or the game theory glossary.
Topics: physician-compensation, contracts, negotiation, hospitalist