Lecture 1:
Negotiating Strategy
Professor Keith Chen
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A note on formal analysis in this course:
We will avoid most formal notation and proofs.
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Negotiations & Social-Science
Game-theoretic optimality a
relationship between human factors
Economics
Rules
Psychology
Preferences
Sociology
Outcomes
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Strength of this Approach:
• Use as a guide:
Rules
– a Normative Science
• How should you negotiate?
– a Predictive Science.
• Limits of this
Approach:
Preferences
Outcomes
– Assuming we know the rules can mislead.
– If we recognize biases and irrationalities,
tells us little about how to take account of
them, for that we need behavioral econ.
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Introduction
• Myself:
– Game Theorist and Behavioral Economist
• Research on Negotiations: Two Examples
– The game theory of Integrative Bargaining
– The Evolutionary and Psychological basis of
cooperation (collusion), and reference point
effects by looking at monkeys.
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Research: Integrative Bargaining
• I study how why and how agendas form.
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Research on Monkeys
Cotton-top Tamarins: cooperative breeder
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Experimental Setup:
barrier
receiver
actor
tool
food
tray
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Training & Solo Conditions
Condition 1
Condition 2
Condition 3 & 4
Condition 5
no barrier
w. barrier
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Intentionality?
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A Simple Reciprocation Game
S2
S1
First Game
S2
S1
Experiment 1 tests for:
(i) Contingent cooperation
(ii) Recognition of reputation
Setup: trained vs untrained actors
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SH: 100% Altruist
JG: 100% Defector
0.6
Frequency of Pulls
0.5
0.4
Pulls for Alt.
0.3
Pulls for Def.
0.2
0.1
0
1
2
3
Session
4
12
Subjects:
Tufted Capuchin: an extractive forager
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Capuchin Purchasing: Gambles
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Capuchin Purchasing Behavior
Movie
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Experiment Two
Experiment 2
Second Question:
Do capuchins care about gains and losses?
E1 shows 1 and E2 shows 2, then both give 1 or 2 (w. prob. ½).
Subject (name):
Percent of trials E1 chosen:
Sessions till stable:
1: FL
2: HG
3: JM
4: MD
5: NN
68%
70%
70%
70%
78%
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9
9
9
13
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Course Description
• Grades
– Class participation 1/2 grade
• Assign days when you lead discussion of
readings
– Final Exam 1/2 grade
• Short essay questions
• Study groups / Case preparation
• Office Hours – 55 Hillhouse Rm. 204
– Thursday mornings, 10:00 to 11:30 or by
appointment.
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Syllabus
• All course materials on the course site
• Expectations
– Read articles and chapters for next class
– Ask questions, but think when and whom
– My question and nametag policy
– Other class policies:
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Next Time
• Introduction to Alternating offers
Bargaining
• Readings:
– Introduction to Issues in Bargaining,
required
• Raiffa, pages 7-25
– Optional: Introduction to bargaining and
notation in game theory
• Osborne & Rubinstein, Chapter 1.
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