Rational Negotiation

Manahan Siallagan
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 Real world decision making
Decision
Maker Analyst/Support
information
Information

Information
feedback
Negotiations

Complex Simple
Dynamic

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Complex Decision Problems
Involve
changing
Difficult to Socially behavior
Often not stable
clearly define complex of
stakehold
ers
Understandi
Different
ng the
stakeholders Involve
problem
have coordinated
(e.g.
different action by a
legislation,
versions of range of
political
what the stakeholders
alliances)
problem is.
are evolving

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 Aji Saka

Fight each other Their strengths are equal Both died

There are two delegations

Each of them serves a holy mission, but the output contradicts with
the mission!
Bottleneck (1)
Bottleneck (2)
So Far, the external factors are treated as
NATURE!

p1,1
E1,1 O1
C1 p1,2
E1,2 O2
D E2,1 p2,1 O1
C2
E2,2 O2
p2,2
 D : a decision maker
 C : possible courses of action (alternatives)
 O1 and O2 : possible outcomes/consequences/payoffs
 Ei,j : Events (State of Natures/SON)
 pi,j : probabilities
 What is Interactive Decision
Making?
• In the real situations you don’t act in a
vacuum.
• Instead, you are surrounded by active
decision makers whose choices interact
with yours.
• This interaction has an important effect on
your thinking and actions.

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Interactive vs Cateris Paribus
Kicking a soccer ball and kicking a dog that
growls menacingly and seems ready to
attack.
– Soccer: the result can be predicted from
calculate factors such as force and angle of the
kick, wind direction and speed, weight of the
ball, and soon.
– Dog: The kicker interacts with, and receives
feedback from, another living thing. The result
depends not only on the initiator, but also on the
animal, which might be bite, flee, crouch
submissively, or even ignore the kick.
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Chicken Game

driving
Swerving? driving Swerving?
straight
straight on?
on?
Both driving straight on Both die
Straight on: Hero

Both swerving Both lost of face

One swerve (semi chicken)

Swerve: Chicken
 Preferences

Most Prefer Hero (4)

Semi-chicken (3)
Dead (2)
Least Prefer Chicken (1)

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How do we describe the situation?

Player 2
Equilibrium
P1/P2 DS S

DS (2,2) (4,1)

Player 1 S (1,4) (3,3) But, (3,3) is

better than
(2,2)
Can the situation change? Actually, I want
(3,3) to realize,
but I don’t trust
with P1, and so
Actually, I want does he.
(3,3) to realize,
but I don’t trust
with P2, and so
does he. Player 2
P1/P2 DS S
Can I
make DS (2,2) (4,1)
agreemen
Player 1 S (1,4) (3,3)
t with
him?
But,
(3,3) is
better
than
(2,2)
Film Beautiful Mind

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 How Do We Deal with Conflict?
Forcing
The use of power and position (formal, informal)
Smoothing/Avoidance
Gloss over/play down differences; let problems pass
Negotiations
Win-lose
Win-win
Assisted Negotiations
Third-party involvement to aid resolution

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 The Golden Rule of
Negotiation

People will not negotiate with

you unless they believe you
can help them or hurt them.

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 Stake Holders’ Power/Interest Grid
interest

Keep informed Work together

Subjects Players

Crowd Context Setters

Minimal effort Keep satisfied

power 17
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 Film
• How to negotiate the best price

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 Anchoring Effect

A negotiator may be trapped by opening price of

his/her partner.

In order to be spared from the trap, then a

negotiator should be brave to response the
opening price drastically.

There is a power of making first offer.

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 Film
• Deal with the devil

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 Winner Curse

When a proposal of a negotiator is easily agreed

by his/her partner, then there is high possibility
that the negotiator demands too low.

Why does this happen?  Incomplete information

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 Steps of Rational Negotiation

Rational Negotiation requires negotiator

to follow a procedure leading to an
optimal results by combining the
following two approaches:
1. Distributive Approach
 Competing to get a bigger share of a pie
2. Integrative Approach
 Collaborating to create a bigger pie

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Claiming Vs Creating Value
Integrative
Approach can
minimize
“leaving money
Utility to Party B

All possible on the table!”

agreements
Integrative
Approach

Distributive
Approach
Utility to Party A
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Our Agenda

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THANKS

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