International Negotiations 2009 Fall Semester Professor Jasper Kim

International Negotiations 2009 Fall Semester Professor Jasper Kim Anticipating Your Rival’s Response EWHA Graduate School of International Studies Development and Cooperation 082 SIS 90 Ju Young Lee International Negotiations 1

Introduction • “Should he refuse to play Lucy’s game? ” • Two possible outcomes • Letting Charlie kick • Seeing Charlie fall • Lucy’s preference is for the latter • Charlie should have been able to predict her action. • Remarriage : a triumph of hope over experience Corbis photo International Negotiations Ju Young Lee 2

Two Kinds of Strategic interaction • The essence of a game of strategy : interdependence of the players’ decisions. • Sequential – The players make alternating moves. • Simultaneous – The players act at the same time, in ignorance of the others’ current actions. Corbis photo International Negotiations Ju Young Lee 3

The First Rule of Strategy • “Look Ahead and Reason Back” • Visual aid – A “tree diagram” of the choices Corbis photo International Negotiations Ju Young Lee 4

Decision Trees and Game Trees • Decision Tree : describes one’s option at each junction, looks like a tree with its successively emerging branches • Ex) How to get to the main library? Corbis photo International Negotiations Ju Young Lee 5

Decision Tree (Con. ) • Ex) How to get to the main libarary? Corbis photo International Negotiations Ju Young Lee 6

Decision Tree (Con. ) Hellen Hall Dorm. Left Right Left Hill Stairs Hill Hellen Hall Left Trough ECC Right International Negotiations Elevator Right Stairs Left Hill Right ECC Stairs Left Ewha Front Gate Winding road Corbis photo Right Take a cap and go 7 Ju Young Lee winding road

Decision Trees and Game Trees • Game Tree : two or more players • Ex) What if a new book store enters ECC book market? Kyo. Bo Lee’s book store Enter Keep out Accommodate +$100, 000 to Lee’s Fight Price War -$200, 000 to Lee’s $0 to Lee’s International Negotiations Corbis photo Ju Young Lee 8

More Complex Trees • Chess, tic-tac-toe • In many games, each path ends after a finite number of steps. – Win or lose or draw –> End – Substantial profit or bankruptcy –> End – Successful treaty or mutual destruction –> End • For any game with a finite number of sequential moves, there exists some best strategy. – See ahead and determine a guaranteed winning strategy by working back. Corbis photo International Negotiations Ju Young Lee 9

More Complex Trees • Examples – “Will this path after four or five moves lead to a generally good position or a bad one? ” – A computer chess program Explicit logic from backward reasoning Rules of thumb for valuing intermediate positions based on experience Corbis photo International Negotiations Ju Young Lee 10

Bargaining • An illustration of how backward reasoning enables us to predict the outcome of games with alternating moves. • 50: 50 split : backward reasoning solution • REMEMBER! 1) Rules of the game : Who gets to make an offer to whom 2) What happens if the parties fail to reach and agreement Corbis photo International Negotiations Ju Young Lee 11

Bargaining (Con. ) • Time is money Take Do not take + 0 + Take Do not take International Negotiations Ju Young Lee +25 0 Corbis photo 12

Bargaining (Con. ) Take + Take Do not take 1/3 : 1/3 Take Do not take 1/6: 1/6 Do not take Take 0 + Do not take Take 1/4 : 1/4 Do not take Take 1/8: 1/8 Do not take “Split-the–Difference” Solution!! International Negotiations Take 1/16: 1/16 Do not take 0 Corbis photo Ju Young Lee 13

War and Peace • Libya – Sudan : Two antagonistic neighbors • Egypt : “My enemy’s enemy is my friend. ” • Israel : A real threat for Egypt. Israel Libya Egypt Sudan Corbis photo “How Many People Are Playing? ” International Negotiations Ju Young Lee 14

War and Peace The Good • 30% The Bad • 80% The Wierd • 100% Corbis photo International Negotiations Ju Young Lee 15

Games the Korean Play • Korean Election Campaign of 2002 Presidential Election Noh Old & Stable way Lee New & Risky way Noh * Old & Stable way Lee wins New & Risky way Noh has a chance Old & Stable way Noh has a chance New & Risky way Lee wins 2002. May 2002. December Earlier moves should be observable to those who choose later. Lee vs Noh = 40% : 20% Corbis Lee vs Noh = 47% : ? *Strategies must be Ju Young Lee irreversible International Negotiations photo 16

Lessons From This Chapter • Look Ahead and Reason Back. • Use visual aid like a “tree diagram” of the choices. • In many games, each path ends after a finite number of steps. • Therefore, combine explicit logic from backward reasoning and rules of thumb for valuing intermediate positions based Corbis photo on experience. International Negotiations Ju Young Lee 17

Lessons From This Chapter • Time is money. • Take “Split-the–Difference” Solution. • The number of people playing the game does matter! • Earlier moves should be observable to those who choose later. • Strategies must be irreversible. Corbis photo International Negotiations Ju Young Lee 18

Discussion • In tic-tac-toe game and Charlie’s story, what kinds of factors hinder us from anticipating? • Now we know the rules in bargaining. However, we cannot simply solve the labor strikes in reality. Discuss the existing complex and subtle features in payment negotiation. Corbis photo • Simulation Games International Negotiations Ju Young Lee 19