Magical thinking: people believing in things more strongly than either evidence or experience justifies. It is a bargaining strategy that I see used again and again in mediations that consistently does not work.
Mediators should be masters at analogizing. Yet, getting people to see time as a stream in which the future is always on the verge of becoming the past is no easy task. Mediators have to constantly ask what is new about the present because “[T]he future may surprise. It surprises because something in the present, hard to see, weakens the past as a guide.” – Thinking in Time (http://www.simonandschuster.com/books/Thinking-In-Time/Richard-E-Neustadt/9780029227916)
People do not often resolve lawsuits (or other controversies) out of fear. They resolve them when the outcomes make sense to them. Their decisions to settle are rooted in self-interest. But self-interest is hard to discern when there is no reasoned way to understand it. For example, a decision to resolve a controversy based on the fact that litigation will inevitably cost as much (or more) than the amount in dispute is an important fact. But the emotional reaction to such an outcome is often subsumed by magical thinking and the power of unreasonable expectations of what is to come based on imagining the past.