Negotiation: Game Theory and Games

Topics: Game theory, Nash equilibrium, Decision theory Pages: 39 (13526 words) Published: July 1, 2012
Negotiation theory
Last updated 9 months ago
The foundations of negotiation theory are decision analysis, behavioral decision making, game theory, and negotiation analysis. Another classification of theories distinguishes between Structural Analysis, Strategic Analysis, Process Analysis, Integrative Analysis and behavioral analysis of negotiations. Individuals should make separate, interactive decisions; and negotiation analysis considers how groups of reasonably bright individuals should and could make joint, collaborative decisions. These theories are interleaved and should be approached from the synthetic perspective. Common Assumptions Of Most Theories

Negotiation is a specialized and formal version of conflict resolution most frequently employed when important issues must be agreed upon. Negotiation is necessary when one party requires the other party's agreement to achieve its aim. The aim of negotiating is to build a shared environment leading to long-term trust and often involves a third, neutral party to extract the issues from the emotions and keep the individuals concerned focused. It is a powerful method for resolving conflict and requires skill and experience. Zartman defines negotiation as "a process of combining conflicting positions into a common position under a decision rule of unanimity, a phenomenon in which the outcome is determined by the process." Most theories of negotiations share the notion of negotiations as a process, but they differ in their description of the process. Structural Analysis considers this process to be a power game. Strategic analysis thinks of it as a repetition of games (Game Theory). Integrative Analysis prefers the more intuitive notion of process, in which negotiations undergo successive stages, e.g. pre-negotiation, stalemate, settlement. Especially structural, strategic and procedural analysis build on rational actors, who are able to prioritize clear goals, are able to make trade-offs between conflicting values, are consistent in their behavioral pattern, and are able to take uncertainty into account. Negotiations differ from mere coercion, in that negotiating parties have the theoretic possibility to withdraw from negotiations. It is easier to study bi-lateral negotiations, as opposed to multilateral negotiations. Structural Analysis

Structural Analysis is based on a distribution of empowering elements among two negotiating parties. Structural theory moves away from traditional Realist notions of power in that it does not only consider power to be a possession, manifested for example in economic or military resources, but also thinks of power as a relation. Based on the distribution of elements, in structural analysis we find either power-symmetry between equally strong parties or power-asymmetry between a stronger and a weaker party. All elements from which the respective parties can draw power constitute structure. They may be of material nature, i.e. hard power, (such as weapons) or of social nature, i.e. soft power, (such as norms, contracts or precedents). These instrumental elements of power, are either defined as parties’ relative position (resources position) or as their relative ability to make their options prevail. Structural analysis is easy to criticise, because it predicts that the strongest will always win. This, however, does not always hold true. Strategic Analysis

According to structural analysis, negotiations can therefore be described with matrices, such as the Prisoner's Dilemma, a concept taken from Game Theory. Another common game is the Chicken Dilemma. Strategic analysis starts with the assumption that both parties have a veto. Thus, in essence, negotiating parties can cooperate (C) or defect (D). Structural analysis then evaluates possible outcomes of negotiations (C, C; C, D; D, D; D, C), by assigning values to each of the possible outcomes. Often, co-operation of both sides yields the best outcome. The problem is that the...
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