Thoughts on Winning As Much As You Can - NYU



An Example of The Negotiator's Dilemma

A city mayor and the CEO of a cable company are in talks over the terms of an exclusive contract to provide cable service for the city. The mayor cares a great deal about getting service quickly because her election will depend on it; a low price is only somewhat important. Ideally, she'd like to have lots of channels, but that's a minor point. Meanwhile, the Cable CEO cares a great deal about getting a high price, because the firm has a serious cash flow problem that a high price will help solve. Ideally she'd like to have a lot of time to complete the project, but it's only half as important to her since it's not that hard to get the project done quickly. Lastly, it would be helpful to have lots of channels so she can raise more ad revenue, but this is a minor concern.

Mayor's Priorities (relative weight) Cable CEO's Priorities (relative weight)

1. Fast completion (60 points) 1. High price (60 points)

2 Low price (30 points) 2. Slow completion (30 points)

3. Many channels (10 points) 3. Many channels (10 points)

Each negotiator fears being cheated if she's candid about her priorities. The mayor fears that if she reveals her need for fast completion, the CEO will say "oh, you need the service fast? Too bad, that will really cost a lot." So each decides to downplay what she really wants so she won't have to pay a lot for it. (For example, the mayor will pretend that she's only slightly concerned about speed. "It might be nice to have it fast, I suppose, but it's not that big a deal to us.") The CEO similarly plans to pretend she doesn't care how many channels there are.

After several hours they agree at this 'split it down the middle' compromise:

Value to Mayor Value to CEO

moderate price 15 points 30 points

moderate completion 30 points 15 points

moderate number of channels 5 points 5 points

50 points 50 points

Yet they each would have preferred swapping the cheap for the dear:

Value to Mayor Value to CEO

High price 0 points 60 points

Fast completion 60 points 0 points

Many channels 10 points 10 points

70 points 70 points

But they couldn't come to this deal because they were afraid to be candid with each other.

Thoughts on Winning As Much As You Can

"Only a fool holds out for the top dollar."

Joseph Kennedy

"A successful negotiation isn't one where I get everything and you get nothing.... I haven't done a single contract that I couldn't have gotten more money on. I always leave money on the table... [b]ecause it's possible to push the price so far, create such antagonism, that the extra 10% isn't really worth it. If someone feels you held them up, they're going to take it out on your business or...on you. You have to give the other people a profit margin and let them live. You want them to thrive and grow.... You can't play tricks, because you'll probably be going back to these people again- or to someone they know. Your good reputation is incredibly important.... If it really is a one-time deal then I wouldn't leave as much, but I still wouldn't try for the last dollar...."

Bob Woolf, a leading sports negotiator

If you wish to win as much as you can, don't try to win as much as you can

"You've got to develop the reputation for being smart and honest...I find out everything I can [before I sit down to talk.] Information is power."

Bob Woolf

"If you don't like the choice between hard and soft positional bargaining, you can change the game...[with a] method called principled negotiation."

Fisher & Ury, Getting To Yes

To find ways to wisely cooperate (and discourage cheating), be prepared to be hard on the problem, soft on the person.

"Trust, but verify."

Ronald Reagan, on disarmament talks with the Soviet Union

When trust is low and you must find a way to agree, thoughtfully be prepared to suggest trust substitutes too.

"People decide to cooperate or defect at least partly on the basis of the quality of their interactions with specific individuals...."

Economics Prof. Robert Frank, Cornell University

To create a climate for wise cooperation, spend time on personal matters

The Basic Trust Substitutes

Watching Solutions - ways to keep an eye on the other person

Clear Rules and Boundaries

Disclosure and Documentation

Early Warning Mechanisms

Evidence of Agreement

Monitors and Police Agents.

Physical Security Devices

Power Sharing Arrangements

Simultaneous Exchange and Staged Commitments

Tests

Sponsors and Go-Betweens - trustworthy 3rd persons who can shore up trust

Guarantors

Mediators

References

Trust Bridges

Incentives and Penalties

Basic Penalties

Collective Action

End the Relationship

Punishment by Governing Power*

Risk Shifting

Shame and other social penalties

Trust Accounts/Exchange of Hostages

Solemnizing gestures

Violence

Basic Incentives

Lengthen the Shadow of the Future

Link Other Person's Interests to Other Person's Promise

Markets

Objective Criteria- measures of fairness both sides can trust

Objective Standards

Arbiters

Sharing Rules

Games of Skill and Chance

Formalized Relationship - clear rules for meeting, treating each other

Alternative Dispute Resolution Clauses

Regularly Scheduled Meetings and Events

Rules of Humanization, written and unwritten

*Legally Enforceable Agreement

Trust Substitutes in a Landlord - Tenant Relationship

Watching Solutions" in an Apartment Rental Agreement.

Clear Rules in the lease spelling out what each party must do when.

Disclosure by Tenant on application form reveals information L can use to assess T

Documentation such as a tax return or a pay stub to show T has enough to pay the rent

Early Warning Mechanism- pay 1st of month so LL knows early if T breaks promise to pay

Monitor- Super, doorman in building can spot and report T misconduct

Evidence of Agreement- Agreement will be put in writing and signed.

Witness such as a broker or a notary public to strengthen evidentiary effect of signing

Simultaneous Exchange T gets keys when T signs and makes 1st payment.

Staged Commitment T rents for a year or two at first, and then negotiate a renewal either may

end the relationship if the other hasn’t kept his word in the most recent stage.

Sponsors and Go-Betweens in an Apartment Rental Agreement.

Backer or Guarantor. L may require co-signer.

Trust Bridge. Have third party rent directly and sublet to T.

Broker. The broker acts as a go-between during negotiations.

References. From T's current or past landlords, friends and colleagues, or other people.

Incentives and Penalties in an Apartment Agreement.

Formally Lengthening the Relationship. creates an incentive to pay because T knows he will

continue to see the L each month.

Trust Accounts. L requires T to post first and last month’s rent in advance plus a security deposit.

Price Adjustment for Risk by adding a premium to the rent so LL knows he will not lose a lot if T

turns out to be untrustworthy.

Market. If one turns out to be dishonest and there is a strong market, the other can rent with

someone else.

Interests design the agreement to satisfy LL's and T's Interests as fully as possible. Each can be

more confident that you will live up to the deal because each likes it.

Threat of Litigation of course is the most obvious penalty one may use to penalize the other

Collective Action T can organize a rent strike if LL does not keep his promises.

End the Relationship by refusing to renew the lease.

Shame- One can publicizing the other's misconduct through media, government agencies.

Threat of Violence T can damaging or neglecting the rental property. LL can threaten violence by

changing the locks and physically evicted with the help of your own people or the sheriff.

Solemnizing Gesture printed lease, legal jargon, formalizes the commitment and stake their

reputations more fully to it.

Objective Criteria in an Apartment Agreement.

Objective Standards - Goverment regulations, the printed lease itself and the opinions of brokers,

other tenants, and other landlords act as fair standards in case of dispute.

Formalized Relationship in an Apartment Agreement. Lease may call for landlord-tenant

meetings and ADR clauses.

Northern Ireland Peace Negotiators Reach Ground-Breaking Settlement- April 16,1999

Self-Rule for Province Planned

Political leaders participating in the Northern Ireland peace talks in Belfast, the provincial capital, April 10 tentatively agreed to a settlement aimed at ending the region's long-running sectarian conflict. The settlement proposed fundamental changes in the way Northern Ireland was governed, including the introduction of extensive home rule in the province....

Mediator Former U.S. Senator George J. Mitchell (D, Maine) April 10 announced the agreement in Belfast after a 33-hour-long meeting, in which he and the other peace-talks delegates had negotiated several final details of the plan

Link to interestsThe agreement was designed to balance the interests of Northern Ireland's Protestant "unionists," who wanted the province to remain a part of Britain, and Catholic "republicans," who advocated the unification of Northern Ireland and the Irish Republic as a single, independent nation. Under the agreement, British rule would continue, but many legislative matters would be handled locally by a new provincial assembly.

Sponsors Participants in the peace talks endorsing the agreement included British Prime Minister Tony Blair, Irish Prime Minister Bertie Ahern and David Trimble, head of the Ulster Unionist Party, Northern Ireland's largest Protestant party. Republican leader Gerry Adams, the head of Sinn Fein, attended the final negotiating session but did not formally sign the pact. He indicated that he would seek approval for the plan from other Sinn Fein leaders at an upcoming party meeting.

Northern Ireland Assembly Set

Formalized Under the April 10 peace agreement, a 108-seat democratically elected assembly would be

Relationship created to legislate many local matters in Northern Ireland.

Power In the course of the peace talks, republican delegates had expressed concern that the new ass-

Sharing embly would be dominated by Protestant unionists. (Far more Protestants than Catholics lived in the province, and the legislature was consequently expected to have a large Protestant majority.) To counteract that possibility, the agreement stated that legislation voted on in the assembly would require a 70% majority for passage.

Enhanced Links to Ireland Proposed

The creation of the North-South Ministerial Council was seen as a significant step toward satisfying republicans' demands for enhanced political cooperation with the Irish Republic. The peace settlement also proposed the creation of another body, the Council of the Isles. That body, also to be known as the British-Irish Council, would discuss matters in which Britain--including Northern Ireland--and the Irish Republic had a shared interest

Security Issues Addressed

Sponsor Several sticking points in the peace negotiations had related to security and law enforcement within Northern Ireland. According to press reports, the Ulster Unionists almost rejected the accord on the last day of the talks out of concern that the pact might not force paramilitary groups to disarm. U.S. President Clinton, a fervent supporter of peace initiatives in the province, early April 10 placed a phone call to Ulster Unionist head Trimble, assuring him that the groups would be forced to surrender their arms.

Go-between The peace agreement reaffirmed a commitment to disarming paramilitary groups and ...

of eliminating the groups' arms supplies within two years. The plan stated that all relevant

Monitor parties would with an existing independent international commission that was in charge of disarmament. Among other security matters, the agreement proposed that Britain work toward returning to "normal security arrangements" in the province, largely by reducing the presence of military troops there. Additionally, an independent commission would look into eforming the province's system of law enforcement. (

Arbitrators .htm April 16, 1998)

Win As Much As You Can - Part II

Preparation for the 11th Round

In a few minutes, you will negotiate one more round with the other people in your group. (Play with the same people you just played with). You will have five minutes to negotiate before you throw your coin. As always, you may throw a head or a tail. The payoff (or the loss) will be worth 20 times the usual amount. In addition, the student(s) in the group who get(s) the highest positive score of the members of the group on this round alone (not counting earlier scores) will receive one or more extra points on the class participation portion of his or her grade. If all four student(s) in the group get the same positive score for this round, each group member will get one point. I will award no points to a student who gets a negative score. (See the Payoff Chart below for details). As always, you may throw a head or a tail. Please record your results and your names on one copy of this handout and submit it when you're done.

Payoff Chart

4 heads: win $20 each and 1 extra point for class participation

3 heads: lose $20 each

1 tail: wins $60 and 4 extra points for class participation

2 head: lose $40 each

2 tails: win $40 each and 3 extra points for class participation

1 head: loses $60

3 tails: win $20 each and 2 extra points for class participation

4 tails: lose $20 each

(continued)

Possible Ways to Cope With the Trust Dilemma in Round 11

If your group wants to come to an agreement but you are not sure everyone will abide by it, what can you do? Please review the following list of ways to build or substitute for trust. Then use it to help you develop a couple of specific approaches or proposals for your upcoming negotiation.

Make Friends

Appeal to your word,

reputation (e.g., "look how honest I've been")

Appeal to shadow of

the future (e.g., "we'll see each other again")

Appeal to group

norms (e.g., "it's just not cool around here to get a reputation for

backing out of deals")

Use gestures

and tokens (e.g. give small gifts)

Make appeals to

common interests (e.g., appeal to common goal, enemy)

Use Trust Substitutes

Use escrow (e.g., each student puts up real cash in escrow and whoever defects loses the money to the others.)

Use a guarantor (e.g., have someone from outside the group guarantee your promise- if you defect, she pays points or cash to others.)

Use a go-between (e.g., have Professor Freeman confirm each is holding a "heads")

Use side deals

and penalties (e.g., "I'll pay you a $0.XX if you go along" or "I won't

let you see my notes)

Use enforceable

agreements (e.g., enforceable by someone who can force each side to live up to his or her promise.)

Use objective process (e.g. flip a coin, share points regardless)

Use Creativity

Find a creative (e.g., is there a creative way to make the payoffs better?)

to enlarge the pie)

(continued)

Win As Much As You Can Round II Scoring Sheet

Submit Just One Sheet for your Entire Group

Group No:________

Student Name (Print) Heads or Tails $ and points won or lost

1.

2.

3.

4.

If you reached a four way agreement, how did you overcome the Trust Dilemma? _____________________________________________________________

-----------------------

Mending Walls

Something there is that doesn't love a wall,

That sends the frozen-ground swell under it

And spills the upper boulders in the sun,

And makes gaps even two can pass abreast.

The work of hunters is another thing:

I have come after them and made repair

Where they have left not one stone on a stone,

But at spring mending-time we find them there,

I let my neighbor know beyond the hill;

And on a day we meet to walk the line

And set the wall between us once again.

We keep the wall between us as we go.

To each the boulders that have fallen to each.

And some are loaves and some so nearly balls

We have to use a spell to make them balance:

'Stay where you are until backs are turned!'

We wear our fingers rough with handling them.

Oh, just another kind of outdoor game,

One on a side. It comes to little more:

There where it is we do not need the wall:

He is all pine and I am apple orchard.

My apple trees will never get across

And eat the cones under his pines, I tell him.

He only says, 'Good fences make good neighbors.'

Spring is the mischief in me, and I wonder

If I could put a notion in his head:

'Why do they make good neighbors? Isn't it

Where there are cows? But here there are no cows.

Before I built a wall I’d ask to know

What I was walling in or walling out,

And to whom I was like to give offense.

Something there is that doesn't love a wall,

That wants it down.' I could say 'Elves' to him,

But it's not elves exactly, and I'd rather

he said it for himself. I see him there,

Bringing a stone grasped firmly by the top

In each hand, like an old-stone savage armed.

He moves in darkness as it seems to me,

Not of woods only and the shade of trees.

He will not go behind his father's saying,

And he likes having thought of it so well

He says again, 'Good fences make good neighbors.'

Robert Frost, 1914

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