Negotiation: Game Theory

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Negotiation | | The use of Game Theory could be a powerful force in negotiation. Investigate the different ways that Game Theory can be used or manipulated to change an outcome in a negotiation. | |

Negotiation | | The use of Game Theory could be a powerful force in negotiation. Investigate the different ways that Game Theory can be used or manipulated to change an outcome in a negotiation. | |

Quentin Dutartre
Yash Ruia
Damien Canneva
Kilian Bus
Emilien Allier
David Schil
Quentin Dutartre
Yash Ruia
Damien Canneva
Kilian Bus
Emilien Allier
David Schil

Contents Introduction 2

What is the Game theory? 2

Theory 4 Making commitments: promises and threats 4 Basic situation 4 Unique Win/Win
…show more content…
At first sight, Neil seems to have a better hand since he is able to have payments by using both of his strategies while Bob can only win by using strategy 1.
It is obvious that Neil would better use strategy 1 in order to maximize his payoffs expectations. But Bob would probably prefer using his second strategy than winning less than Neil, though it would result in a Loose/Loose situation.
Bob will probably threatens to take strategy 2 if Neil chooses the first one. The only way to obtain a Win/Win situation though is for Neil to make a commitment: he must promise to choose 2 if Bob chooses 1.
This is the most basic commitment example.
Unique Win/Win situation
In the following one, there is one only scenario which allows the two player to win, but commitments must be made buy both sides in order to reach the best situation for both.

Here, Neil will probably initially chose strategy 1 in order to avoid loss, but he won’t be able to gain anything though. Bob would probably choose to maximize his payoffs expectations by choosing the first strategy. Finally, neither Bob nor Neil will get payoffs, so that we obtain a Loose/Loose result, which is not acceptable.
They both have to promise to choose the second strategy in order to win.
Commitments and side payments
In this last example, it is not possible to reach a Win/Win agreement but by making side payment. Side payments allows to change the total pie, and though to reach

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