Negotiations, Terrorism and Game Theory

“To be successful negotiators must engage in hard bargaining; they must “start high, concede slowly, exaggerate the value of concessions, minimize the benefits of the other’s concessions, conceal information, argue forcefully on behalf of principles that imply favorable settlements, make commitments to accept only highly favorable agreements, and be willing to outwait the other fellow.”

-Lax and Sebenius

David Lax and James Sebenius are experts in area of negotiations. They have written two books on this subject-  Manager as Negotiator and 3 D Negotiation.

They propose that negotiation has cooperative and competitive elements and these elements are in conflict.

Negotiators face a dilemma in deciding whether to pursue a cooperative or a competitive strategy.

In cooperative or value-creating mode negotiators work primarily to increase the available resources, to find joint gains or “win-win” solutions, so that all the parties benefit. They share information, communicate clearly, maintain a cooperative attitude and focus on developing common interests.

In the competitive or value-claiming view negotiators work primarily to claim the largest share of the disputed goods.

“Player cooperate when they know that their current actions can affect future payoffs, when they believe that a defection now will lead to sufficient defection by their opponent to make the initial move undesirable.”

-Lax and Sebenius

The conflict between cooperative value-creating strategies and competitive value- claiming strategies results in what is called as Negotiator’s Dilemma.

Lax and Sebenius apply game theory to negotiator’s dilemma

If both parties cooperate they will both have good outcomes i.e. payoff for both will be high. If one cooperates while the other competes the cooperative party will get a poor payoff, while the competitive party will get a very high payoff. If both parties compete they both will get a mediocre payoff.

Thus, both parties are better off if they both cooperate.

Lax and Sebenius have come with concept of 3-D negotiations. What has been described above i.e. competitive or cooperative bargaining or “table tactics” is just one element of bargaining. There are two other dimensions of bargaining.

The second dimension of bargaining is deal design i.e. systematically unlock economic and noneconomic value by creatively structuring agreements

Then there is third dimension- setup. Before going for bargaining sessions, the negotiators should ensure that right parties have been approached, in the right sequence, to address the right interests, under the right expectations, and facing the right consequences of walking away if there is no deal.

Dr. Todd Sandler has applied principles of negotiation and game theory to governments and terrorists.

Terrorists fare better than governments because governments due to political compulsions are unable to conduct cooperative bargaining and effectively eliminate terrorism. Terrorists take advantage of inability of governments to negotiate effectively amongst themselves, this prevents a united front against terrorists ex. India, Pakistan and China have suffered from attacks by terrorists, but they are unable to negotiate effectively, which in turn helps terrorism to flourish.

The diagram below shows that only when governments cooperate, they can win fight with terrorists. Worst situation is when both parties take no action.

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