Anticipating Your Rival’s Response International Negotiations 2009 Fall Semester Professor Jasper Kim Anticipating Your Rival’s Response EWHA Graduate School of International Studies Development and Cooperation 082SIS90 Ju Young Lee International Negotiations

International Negotiations 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 International Negotiations

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. International Negotiations

The First Rule of Strategy “Look Ahead and Reason Back” Visual aid A “tree diagram” of the choices International Negotiations

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

International Negotiations Decision Tree (Con.) Ex) How to get to the main libarary? International Negotiations

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

Decision Trees and Game Trees : two or more players Ex) What if a new book store enters ECC book market? Accommodate +$100,000 to Lee’s KyoBo Enter Lee’s book store Fight Price War -$200,000 to Lee’s Keep out $0 to Lee’s International Negotiations

International Negotiations 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 . International Negotiations

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 International Negotiations

International Negotiations 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 International Negotiations

International Negotiations Bargaining (Con.) Time is money Take + Do not take Take + +25 Take Do not take Do not take International Negotiations

International Negotiations Bargaining (Con.) Take + Take 1/3 :1/3 Do not take Take 1/6:1/6 Do not take Do not take Take + Take 1/4 :1/4 Do not take Take 실제로 시뮬레이션 게임 1/8:1/8 Do not take Take 1/16:1/16 Do not take Do not take “Split-the–Difference” Solution!! International Negotiations

International Negotiations 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 “How Many People Are Playing?” International Negotiations

International Negotiations War and Peace The Good 30% The Bad 80% The Wierd 100% International Negotiations

International Negotiations Games the Korean Play Korean Election Campaign of 2002 Old & Stable way 2002 Presidential Election New & Risky way Lee Noh Noh has a chance Lee wins A sufficiently large core of voters were satisfied with Lee’s performance to ensure that, if the if the two fought similarly oriented campaigns, the effects of the two would cancel and Lee would win. 2002. May 2002. December Lee vs Noh = 40% : 20% Lee vs Noh = 47% : ? * Earlier moves should be observable to those who choose later. *Strategies must be irreversible International Negotiations

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 on experience. International Negotiations

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. International Negotiations

International Negotiations 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. Simulation Games International Negotiations