Negotiation Game Theory

Why does anyone negotiate anything?

Why does anyone negotiate anything?

We might, for example, simply demand that other people do what we want. If we are very powerful and they are very weak, they might even do it. However, if what we make them do is something they really don’t want to do, being forced to do it will engender resentment and they will look for an opportunity to damage us as payback. We might portray their concession as a win for us, but we have really just stored up trouble for the future.

We could, as an alternative, just ask people to do what we want. If they are very nice people and it doesn’t inconvenience them too much, then they might do it. However, if they are normal people, their own objectives will probably take priority over ours and, if what we want puts them to any significant trouble, they won’t do it. However we portray this, we look bad, and people will say we shouldn’t have asked in the first place.

So, in most cases, if we are not to view the problem as a zero sum game, a certain amount of give and take is going to be required on all sides. Not everyone can have everything they want, and we will have to give up things we see as low priority in order to get things we see as high priority. The people we are negotiating with will, of course, do the same, but if we are lucky, their high priorities will be low priorities for us and vice versa.

It might be nice if we could all put our cards face up on the table at the same time and save ourselves hassle, but this doesn’t work unless everyone does it. Most people won’t, because they don’t have to, and they think they can do better by playing the game called negotiation. To show your hand when your opponent is playing the game rather than showing his cards is, unfortunately, to lose.

As any card player knows, you can play a good hand badly or a weak hand well. If you play well, you will end up with more than you might otherwise have done, and if you play badly you will deserve to lose, even if you don’t lose because your opponent fails to take advantage of your mistakes.

The desire to win struggles with the fear of losing in the mind of every player in every competitive game. Uncertainty in the mind of your opponent is the key to success. A good player can convince his opponent he is winning even when he is not; a bad player can lose confidence and throw down a winning hand.

If, for example, in trade negotiations with someone, we tell them that we will not walk away without a deal, this removes any incentive for them to give us an acceptable deal.

This was very obvious in the UK’s Brexit negotiations; many anti-no-dealers were really remainers, and they were actually trying to lose the game. That is, they believed if the only deal offered was an unacceptable deal, the outcome would be that we remained.

However, the dilemma they faced was that if they successfully persuaded the EU not to make concessions, because they expected that the UK government would be overthrown and replaced by remainers, and then this UK government was not overthrown, the anti-no-dealers would actually have brought about no deal, whereas if they had allowed the negotiation game to be played, a deal would have been much more likely.

In the end, the deal was a lot worse than it need have been, but the UK still left the EU anyway. Everybody lost, because the remainers turned a strong negotiating position into a weak one without quite succeeding in their aim to overthrow the popular vote.

In the negotiations game, those determined to have everything risk ending up with nothing.

»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»»

________________________________________________________________________