L2&3 Game theoretic approach Flashcards
What is a single issue, distributive negotiation about?
One party’s gain is the other party’s loss.
What are the main problems when setting your BATNA?
- Incomplete information
- Uncertainty (e.g., unverifiable information)
- Multi-dimension “problem” (e.g., you have to take more things into account, not just the price of the sneakers or any other item)
What do you need to do when setting you BATNA / reservation price?
In practice:
1) Brainstorm alternatives (e.g., price of other sneakers, same sneakers in different shops…)
2) Evaluate each alternatives
3) Attempt to improve your BATNA (try to improve or find more alternatives)
4) Determine the reservation price
Your BATNA must be based on objective facts.
True / False
True - Your BATNA is not something that you wish for, but it is determined by objective reality so it cannot be influenced by the other party’s persuasion techniques.
It can only change as a result of a change of objective facts and evidence.
What if the Bargaining zone is very small?
*(zone between both reservation prices)
A deal could be reached, but it is very unlikely and you would need very skilled negotiators.
What if the Bargaining zone is negative?
A deal would never be reached.
What is a Lose-Lose scenario?
The worst outcome possible: It occurs
“when, by overreaching greed, no bargain is struck, and a trade that could have been advantageous to both parties does not come off at all” (Benjamin Franklin)
What is (not) the goal of negotiating?
- The goal is NOT reaching an agreement & getting to yes.
- The goal is to reach an agreement that is better for you than what you would get without one.
In many cases, no agreement at all is better than a bad deal.
What is Game theory?
Game theory is identifying determinants of human decisions in strategic situations through mathematical models that simplify reality (like a map).
At leats two players are involved and they make decisions independently.
Are the Game theory models and theories realistic?
No, becuase they reconstruct the complex environment in a simplified way:
- taking out distracting elements
- restricting the model to the essential elements (like maps)
- isolating a particular mechanism to serve the purpose
Are the Game theory models and theories realistic?
No, becuase they reconstruct the complex environment in a simplified way:
- taking out distracting elements
- restricting the model to the essential elements (like maps)
- isolating a particular mechanism to serve the purpose
RESTAURANT EXAMPLE:
- Expensive dish: Value = 18 / Price = 20
- Inexpensive dish: Value = 12 / Price 10
Single person decision problem: What would you do if everybody pays their own bill?
I would buy the inexpensive dish because the net value is positive.
RESTAURANT EXAMPLE:
- Expensive dish: Value = 18 / Price = 20
- Inexpensive dish: Value = 12 / Price 10
Game situation: What would you do if the total bill is shared equally with another person?
1) Selfish approach: I take the expensive one, and the other takes the inexpensive.
Value = 18 and Price = 15 (NV = +3)
2) Benevolence approach: I take the inexpensive, and the other takes the expensive.
Value = 12 and Price = 15 (NV = -3)
3) Independent decision: We both take the expensive one.
Value = 18 and Price = 20 (NV = -2)
4) Pareto efficient decision: We both take the inexpensive one.
Value = 12 and Price = 10 (NV = +2)
Which are the crucial elements of game theory and strategic situations?
- Understanding the situation (“game”)
- Interpreting and revealing information
- Putting yourself in others’ shoes to predict and influence what they will do
- Outdoing an adversary when (s)he is trying to do the same to you
- Finding ways to cooperate, even when others are motivated by self-interest (not benevolence)
Which are the different forms of games?
1) Simultaneous move games (normal form): players have the same decision “deadline”, they make decisions at the same time so they don’t know what the other is going to do.
2) Sequential move games (bargaining form): players move in turns, they react to the other negotatior’s decision / move (e.g., chess, some card games…)
