Lecture 1: Introduction by A5bS8u

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									    Lecture 1:
Negotiating Strategy
 Professor Keith Chen




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




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  Negotiations & Social-Science
    Game-theoretic optimality a
relationship between human factors

                       Economics
             Rules

                Psychology      Sociology


  Preferences        Outcomes


                                            3
   Strength of this Approach:

• Use as a guide:    Rules
  – a Normative Science
     • How should you negotiate?
  – a Predictive Science.
• Limits of this Approach: Outcomes
             Preferences
  – 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.
                                                   4
              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.




                                                   5
Research: Integrative Bargaining

  • I study how why and how agendas form.




                                            6
   Research on Monkeys




Cotton-top Tamarins: cooperative breeder
                                           7
           Experimental Setup:

                               barrier


receiver
                                         actor


                        tool
   food          tray


                                            8
 Training & Solo Conditions




  Condition 1                Condition 2




Condition 3 & 4              Condition 5

   no barrier   w. barrier                 9
Intentionality?




                  10
A Simple Reciprocation Game
                First Game
S2         S1                S2           S1




      Experiment 1 tests for:
       (i) Contingent cooperation
      (ii) Recognition of reputation
     Setup: trained vs untrained actors
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                     SH: 100% Altruist          JG: 100% Defector




                     0.6

                     0.5
Frequency of Pulls




                     0.4

                                                            Pulls for Alt.
                     0.3
                                                            Pulls for Def.

                     0.2

                     0.1

                      0
                           1      2             3    4
                                      Session
                                                                             12
            Subjects:




Tufted Capuchin: an extractive forager   13
Capuchin Purchasing: Gambles




                          14
Capuchin Purchasing Behavior
           Movie




                          15
                   Experiment Two
                        Experiment 2
              Second Question:
              Do capuchins care about gains and losses?


E1 shows 1 and E2 shows 2, then both give 1 or 2 (w. prob. ½).
Subject (name):                1: FL   2: HG   3: JM   4: MD    5: NN
Percent of trials E1 chosen:    68%     70%     70%       70%    78%
Sessions till stable:            11      9       9         9      13




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       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.
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                Syllabus

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




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                 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.


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