1 Lecture 1: Negotiating Strategy Professor Keith Chen

2 A note on formal analysis in this course: We will avoid most formal notation and proofs.

3 Economics SociologyPsychology Negotiations & Social-Science Rules PreferencesOutcomes Game-theoretic optimality a relationship between human factors

4 Strength of this Approach: Use as a guide: –a Normative Science How should you negotiate? –a Predictive Science. Limits of this Approach: –Assuming we know the rules can mislead. –If we recognize biases and irrationalities, tells us little about how to take account of them, for that we need behavioral econ. Rules PreferencesOutcomes

5 Introduction Myself: –Game Theorist and Behavioral Economist Research on Negotiations: Two Examples –The game theory of Integrative Bargaining –The Evolutionary and Psychological basis of cooperation (collusion), and reference point effects by looking at monkeys.

6 Research: Integrative Bargaining I study how why and how agendas form.

7 Research on Monkeys Cotton-top Tamarins: cooperative breeder

8 barrier actor receiver tray tool food Experimental Setup:

9 Training & Solo Conditions w. barrier Condition 1 Condition 2 Condition 3 & 4 Condition 5 no barrier

10 Intentionality?

11 First Game A Simple Reciprocation Game Experiment 1 tests for: (i) Contingent cooperation (ii) Recognition of reputation Setup: trained vs untrained actors S1S2 S1S2

12 SH: 100% AltruistJG: 100% Defector

13 Tufted Capuchin: an extractive forager Subjects:

14 Capuchin Purchasing: Gambles

15 Movie Capuchin Purchasing Behavior

16 Experiment 2 Experiment Two E1 shows 1 and E2 shows 2, then both give 1 or 2 (w. prob. ½) Sessions till stable: 78%70% 68% Percent of trials E1 chosen: 5: NN4: MD3: JM2: HG1: FLSubject (name): Second Question: Do capuchins care about gains and losses?

17 Course Description Grades –Class participation 1/2 grade Assign days when you lead discussion of readings –Final Exam 1/2 grade Short essay questions Study groups / Case preparation Office Hours – 55 Hillhouse Rm. 204 –Thursday mornings, 10:00 to 11:30 or by appointment.

18 Syllabus All course materials on the course sitecourse site Expectations –Read articles and chapters for next class –Ask questions, but think when and whom –My question and nametag policy –Other class policies:

19 Next Time Introduction to Alternating offers Bargaining Readings: –Introduction to Issues in Bargaining, required Raiffa, pages 7-25 –Optional: Introduction to bargaining and notation in game theory Osborne & Rubinstein, Chapter 1.