Negotiation: Game Theory

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Negotiation|
|
The use of Game Theory could be a powerful force in negotiation. Investigate the different ways that Game Theory can be used or manipulated to change an outcome in a negotiation.| |

Negotiation|
|
The use of Game Theory could be a powerful force in negotiation. Investigate the different ways that Game Theory can be used or manipulated to change an outcome in a negotiation.| |

Quentin Dutartre
Yash Ruia
Damien Canneva
Kilian Bus
Emilien Allier
David Schil
Quentin Dutartre
Yash Ruia
Damien Canneva
Kilian Bus
Emilien Allier
David Schil

Contents
Introduction2

What is the Game theory?2

Theory4
Making commitments: promises and threats4
Basic situation4
Unique Win/Win situation5
Commitments and side payments5
Prisoner’s dilemma7
The Simplest Game: Two Person with a Fixed Pie8
Tacit Barganining8

How to act during a negotiation9
Breakthrough Strategy9
Tactics10

Limits11
The modelisation11
The interpretation12

Conclusion13
Sources13

Introduction
Our group decided to work on the topic three: “The use of Game Theory could be a powerful force in negotiation. Investigate the different ways that Game Theory can be used or manipulated to change an outcome in a negotiation”. The modern Game Theory was created in 1944 with the book “Theory of games and economic behavior” by Oskar Mogenstern and John Von Neumann. It was also developed a lot in the 1950’s with several studies by John Nash. After our seminary about negotiation we thought it would be very interesting to make some research about the Game Theory. Indeed, we made some researches on the Game Theory in our first year in IÉSEG in our economic classes. That is why we were a bit surprised to see that this theory could be also used in a negotiation process to analyze it. It seems to be obvious that using the concepts of that theory could change the course of a negotiation and be understood as a manipulation or just a skill to achieve the goals of the agents in a negotiation. We decided to divide our work in three parts. First, we will define the Game Theory and make some examples. Secondly, we will make an synthesis on how to act as a negotiator during a negotiation. Finally, on the third part we will talk about the limits and the interpretation we can make on that subject. Generally, we can say that our goal is to extend the concept of Game Theory. Indeed, we imagined it only in an economic vision and we want to extend it to a negotiation vision.

What is the Game theory?
The Game theory is a method to study the strategic decision-making. More formally, it is «the study of the mathematical models of conflict and the cooperation between intelligent reasonable decision-makers." An alternative term suggested «as a more descriptive name for the discipline " is the theory of interactive decision. The Game Theory is mainly used in the economy, the political science and the psychology, as well as the logic, negotiation and the biology. The subject of the (landed) at first sent zero-sum games, such as the earnings(gains) of a person equal exactly the clear(net) losses of the other participant (s). Today, however, the Game theory applies to a vast range of relations of class and developed in a term of umbrella for the logical side of science, to include both man and non-people, as computers. Classic uses include the direction of the balance in numerous games, where every person found or developed a tactics which cannot successfully better its results, given the other approach.

Theory
Making commitments: promises and threats
The first assumption to be made is that the goal of any negotiation is to enlarge the pay off for both sides, and in most cases agreements has to be made in order to achieve getting a Win/Win situation. These agreements can be made by making either promises or threats. In both cases, the idea is to benefit from an enlargement of the total pie...
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