1.

1
Sequential move games (trust, bargaining)
Rule of Strategy 1: Look forward and reason backward

“means basically starting from the final outcomes”

 Nash Equilibrium
o A set of strategies where no player
has an advantage to change its
strategy
o Outcome of the game is Nash
Equilibrium if no player wants to
deviate to another strategy given
that the rest of the players are
playing the equilibrium strategy.

 The Ultimatum Game

 Payoff: consequence of choosing an action
 Equilibrium Path: the combination of choices by both players in which the game will result
 Perfect Nash Equilibrium (L1 L4
R5 42 R3)
 Equilibrium payoff (P1:9/P2:7)

 1.2
Social Identity, Cross-cultural communication, promise, commitment
DN: CHAPTER 6

Promise is a non-binding communication (also called “cheap talk”), you are not forced to do it.

Commitment tools
 In many strategic situations where multiple
Nash Equilibria exist it is possible for a player
to force an outcome (s)he favours by
irrevocably committing to a certain plan of
actions before the game is played.
 This usually involves some form of limiting
player’s own choices
o Ulysses and the Sirens
o Armies burning bridges
o Emotions
 Important difference to “cheap talk” a binding
action is taken.

Rosenberg’s model on NVC (non-violent communication)

1. Expressing your own needs
2. Sensing the needs of others
3. Checking to see if the needs are being received accurately
4. Providing empathy to bear the needs of other
5. Translation strategies into positive action and language

Principled negotiation is an interest-based approach to negotiation that focuses primarily on

conflict management and conflict resolution. Principled negotiation uses an integrative
approach to finding a mutually shared outcome. Principled negotiation is successful when
both parties gain from it which they refer to as mutual gain (“win-win” situation)

Principled negotiation according to Fisher & Ury (2012)

 Separate the people from the problem

 Focus on interests, not positions
 Invent multiple options of mutual gain
 Insist on using objective criteria
Making incredible promises and threats credible
1. Contracts (to back up your resolve)
a. Business deals, establish a penalty
b. Institutions of enforcement: court systems, organized crime, mafia
2. Reputation (establish and use it!)
a. Repeated play, record of committing acts (of toughness)
i. Like ratings in restaurants or uber
b. Public declaration of resolve (high stakes!)
3. Cutting of communication
a. Prevents renegotiation
b. Announcing action and cutting off communication (last will, isolation)
4. Burning bridges behind you
a. Denying oneself an opportunity to retreat
b. Military strategies
5. Leaving the outcome beyond your control or to chance
a. Automatic response (Doomsday Machine)
b. Vulnerable to errors and mistakes
6. Moving in steps
a. Spitting deal in parts (easier to trust with small amount)
b. No clear final step (backward induction)
7. Teamwork
a. Joint achievement goal (social pressure)
b. Honor codes (threat of social exclusion)
8. Mandated negotiating agents
a. Promise/reputation in front of electorate
b. Impersonal agent when emotions/friendship involved