Topic 7

Tacit Negotiations and Social DilemmasPresenters:Ahmed IbrahimFaten AttiaNourhane Abdel RahmanOssama Abdel Razek

By end of this presentation, we will be able to learn

• Tacit Negotiations

• Difference Between Tacit and Explicit Negotiations

• Social Dilemma

• Rational Analysis

• Tragedy of The Common

• Escalation of Commitment

Tacit Negotiations

Tacit Negotiations

Originally, The word Tacit comes from Latin word (Tacitus) which means “Silent”In other words: it means “indirect”

Kyoto Protocol 1997

Difference between Explicit & Tacit negotiations

John Nash, American Mathematician who won Noble Award For Economic Sciences in 1994

In Early 50s, Nash made the distinction between Cooperative & Non-Cooperative Negotiations

Cooperative Vs Noncooperative

• Contract is explicit

• Mutual understanding

• People negotiate via proposals and counterproposals and can use words to justify their offers

• People usually come to the table voluntarily

• Contract is tacit

• People often do not know what others will do

• People negotiate through their behaviors and actions rather than promises

• People are often pulled into negotiations without wanting to be involved

US Policy was blessing Mubarak system as he and his regime had been paving the way to American

interests in the region over 30 years

Example of Tacit Negotiation: US Policy Vs The Egyptian Revolution

Demonstrations Swept everywhere in Egypt on 25th of January 2011

On Jan 27th, Clinton stated : “Egyptian Government seeks ways to implement political and social reform. and we will support the government to reach its goal”

The US Government Waited to See How and Where things are going to be settled

By early February, Obama Started asking Mubarak to Leave instead of US usual support

After Mubarak Stepping down, Obama stated: “Egyptian People have made it clear, they need clean fair elections, Revised Constitution and real democracy. US will still be friend and partner to Egypt”

> Negotiation was Interdependent (will do this action when other party does a certain action)> Outcomes are determined by actions

As a conclusion to this type of negotiations:

In Alain Plantey’s book : International Negotiation in the twenty-first century about

“Silence” in Tacit Negotiations

The Prisoner’s Dilemma

AThelma: 1 YearLouise: 1 Year

BThelma: 0 Year

Louise: 15 Years

CThelma:15Louise: 0

DThelma:10 YearsLouise: 10 Years

Louise

Thelma

Do not Confess(Remains Silent)

Confess

Do not Confess(Remains Silent)

Confess

2 Person Dilemma

example of “Prisoner’s Dilemma”

• The two companies have 2 choices:a. "cooperate" (each one not advertise its products)b. "defect" (each one advertises its products)

• Best Choice for Company 1 or Company 2 is to: DEFECT!

Another Example of Prisoner’s Dilemma

• Consider two competing athletes: Alice and Bob. Both Alice and Bob have to individually decide if they are going to take drugs or not.

• Alice thinking:"If Bob doesn't take any drugs," she thinks, "then it will be in my best interest to take them. They will give me

a performance edge against Bob. I have a better chance of winning. "Similarly, if Bob takes drugs, it's also in my interest to agree to take them. At least that way Bob won't have

an advantage over me. "So even though I have no control over what Bob chooses to do, taking drugs gives me the better outcome,

regardless of his action."

• This DILEMMA will force each to take “drugs” as it is after all an “individual choice”, no trust of the other’s behavior

Rational Analysis

Case 1: One Shot Decision

• Dominance Detection:

Negotiator seizes opportunity no matter what’s the other party’s decision :

to confess

• Equilibrium Outcome:

mutual defection No Player improves his/her outcome by making different choice (both know that this decision “confession” is the best or dominant strategy.

Important rule in this case: no communication between the 2 parties.Conclusion: it is a single choice and living with the consequences

Case 2: Repeated Interaction over a fixed number of trials

• The iterated prisoners' dilemma thus to permit the influence of one party on another and give them a mechanism to coordinate their actions.

• If two players play prisoners' dilemma more than once in succession and they remember previous actions of their opponent and change their strategy accordingly, the game is called iterated prisoners' dilemma using the Backward Induction Technique where Negotiator decides what to do in a repeated game situation by looking backward from the last stage of the game

• Conclusion: defection remains the dominant strategy even in repeated trial case

Case for “Iterated prisoner’s dilemma”

• 2 political candidates doing their campaigning.• Terms limits in their state dictate that they can run and hold office for a maximum of 5

years.• Elections are held every year.

• Start analysis from Election number 5: For sure: each candidate will campaign as it is the last chance (same as case 1: one shot

case) So why cooperating in Election number 4 by not campaigning? if Election number 5 is

doomed to be “noncooperative”?

It leads to “PARETO INFERIOR”: optimal outcomes are those of minimally effective cooperation

Case 3: Repeated Interaction for an Infinite or Indefinite amount of time

• We can’t apply the backward induction as there is no “endpoint”.

• Forward Thinking logic: parties reason that they might influence others behavior with their own behavior by time.

• If “cooperate”, parties signal that choice in early trials. But not taking it a general strategy as it might lead to exploitation.

Tit for Tat: An English Saying means “equivalent retaliation”

Tit-For-Tat Strategy: Start by cooperating.Then do whatever your partner did on the previous iteration.

Most of Tit-for-tat can do is to earn as much as its opponents

“For every action, there’s an equal and opposing reaction”

Tit for Tat

Case 1: Tit for Tat

Iran vs. UK

• Gordon Brown, the PM of UK:

• As response to Iran’s action:

Why Tit for Tat is Effective?

• Not Envious: It never aims to beat its opponent rather than maximizing its own gain in the long run.

• Nice: tit for tat always begins the interaction by cooperating.• Tough: tit for tat can be provoked. It will defect if the opponent

invites competition.• Forgiving: as it reciprocates defection, it also reciprocates

cooperation.• Simple: people can quickly figure out what to expect from a player

who follows it.• Stable: negotiators who use this technique often induce their

opponents cooperate.

Tit for tat strategy is not the only stable one, solid defection is a stable strategy as well. (once someone has defected it is difficult to renew cooperation)

How to Recover from Defection?

• Make Situational Attributions: see other side’s behavior as a response to our own actions.

• One Step at a time: trust is not rebuilt in a day. GRIT strategy calls for parties in conflict to offer small concessions.

• Getting even and Catching up: getting even to rebuild trust. It generates future cooperation.

• Make your Decision at the same time: to understand that making decisions at the same time cannot influence the behavior of others.

Superrationality

• People, when taking a decision tend to believe that others will do the same (they are as rational as them)

Social Dilemma vs. Prisoner’s Dilemma

• Involves several people

• Competitiveness is high

• Cost of defection is spread out among the group

• Riskier than Prisoner’s Dilemma (difficult to anticipate people’s behavior)

• Provides anonymity (people can hide among the group)

• People have “less control over the situation”. (OPEC example)

• Universal defection leads to poorer outcomes for everyone than the universal cooperation. If no limits are placed on the pursuit of personal goals, the entire society may suffer

• Two persons are involved

• Competitiveness is lower than social dilemma

• Cost is concentrated upon one person

• The minimal payoff can be anticipated in advance

• Anonymity is impossible!

• People can directly shape and modify the behavior of the other person. (choosing defection: punishes the other, while choosing cooperation rewards the other)

• Defection leads to better personal outcomes

Different Types of Social Dilemma

• Volunteer Dilemma: it is a situation in which at least one person in a group must sacrifice his or her own interests to better the group. Benefits: this volunteering action strengthens group ties.

• Ultimatum Dilemma: one person makes a final offer – an ultimatum- to another person. If the other person accepts the offer, then the first player receives the demand that he/she made. And the other player agrees to accept what was offered to him/her. If the offer is refused, then no settlement is reached and negotiators receive their respective reservation points. “take it, or leave it” offer. It introduces the concept of “ Subgame Perfect Equilibrium”: to offer to the other the minimum knowing that /she would accept even if the game had additional periods or repeated again. “to win even 1 cent is better than nothing”.

That is the game theory but not always realized in reality, people tend to reject this offer if they don’t know the size of the pie. The acceptance rates are driven by how much information the responder has about the size of the total pie, comparing their outcomes to others.

Tragedy of the commons

• Tragedy of the commons is a dilemma arising from the situation in which multiple individuals, acting independently and rationally consulting their own self-interest, will ultimately deplete a shared limited resource , even when it is clear that it is not in anyone's long-term interest for this to happen

Tragedy of the commons

• What if many people share the same resource? And all of them misused it?

• Example: environment pollution and desertification

• Reasons that drive people to do so:1. Maximize their own gain2. Thinking that their action alone won’t have a

measurable impact on others.

Results: if everyone thinks the same, the collective outcome will be disastrous.

Forms of Social Dilemma

• There are 2 forms of social dilemmas:

1. Resource Conservation Dilemma (collective traps): people collect or harvest resources from a common pool. The defection choice occurs when people consume too much. Overconsumption leads to disasters.

Keyword: they “take”

2. Public Goods Dilemmas (Collective fences): people contribute or give resources to a common pool or community. Example: Donations, taxes, voting. The defection choice is to not contribute. Those who do not contribute are called “defectors” or “free riders”.

Example: Positive voters Vs Couchists Keyword: they “contribute”

Negative Competitive Advertising

• It is also called “attack ad”• Concentrates on comparing the company’s products

with the competitors, showing the advantages of its own, and the negative side of the others’ products.

• Results: 1. if in business and marketing world: it keeps the price

low and quality high due to competitiveness in the market.

2. But can also lead to the resentment of the consumer toward certain companies.

3. As for the producers: they can run each other OUT of the business

Example of Negative competitive advertising

• One of the earliest and most famous television attack ads, known as Daisy Girl, was used by Lyndon Johnson against Barry Goldwater in the 1964 presidential election. The ad opened with a young girl innocently picking petals from a daisy, while a man's voice (which may have had somewhat of a 'southwestern' accent similar to Goldwater's) performed a countdown to zero. It then zoomed in to an extreme close up to her eye, then cut to an image of a nuclear explosion. The ad was shocking and disturbing, but also very effective. It convinced many that Goldwater's more aggressive approach to fighting the Cold War could result in a nuclear conflict.

• Let’s watch it together

http://www.youtube.com/watch?v=63h_v6uf0Ao

Explicit Comparative Advertising

• Comparative advertising, as a special form of advertising, is a sales promotion device that compares the products or services of one undertaking with those of another, or with those of other competitors. All comparative advertising is designed to highlight the advantages of the goods or services offered by the advertiser as compared to those of a competitor. In order to achieve this objective, the message of the advertisement must necessarily underline the differences between the goods or services compared by describing their main characteristics.

• It enables consumers to make well-founded and more informed decisions relating to the choice between competing products/services by demonstrating the merits of various comparable products. Based on this information, consumers may make informed and therefore efficient choices.

• Example: Coke vs. Pepsi adhttp://www.youtube.com/watch?v=EMo6o0BtFG8

How to build Cooperation in Social Dilemma?

Structural Strategies

Psychological Strategies

• Align Incentives

• Monitor Behavior

• Regulation

• Privatization

• Tradable Permits

Structural Strategies

• Psychological Contracts

• Superordinate Goals

• Communication

• Personalize Others

• Social Sanctions

• Focus on benefits of Cooperation

Psychological Strategies

Perception

VERBAL7%

VOCAL 38% VISUAL

55%

VISUAL

VOCAL

VERBAL

How we Convey message not what we say

The 3 V Study

How to encourage Cooperation in social Dilemma

• Keep your strategy simple: the simpler your strategy, the easier it is for your competitors to predict your behavior. Trying to minimize uncertainty for your competitors , thus reduce the competitive behavior.

• Signal via actions: actions and not just words• Do not be the first to defect: difficult to recover from

escalating loops of defection• Focus on your own payoffs, not your payoffs relative

to others: focus on your profits rather than beating the others.

• Be sensitive to egocentric bias: consider the fact that your competitors will see you less favorably than you perceive yourself. Just as you see yourself more ethical and more cooperative than others.

Escalation of commitment

• the escalation of commitment refers to the unfortunate tendency of negotiators to persist with a losing course of action, even in the face of clear evidence that their behaviors are not working and the negotiation situation is quickly deteriorating

Escalation of commitment

1. personal escalation dilemmas: involves only one person and the dilemma concerns whether to continue with what appears to be a losing course of action or to cut one’s losses.

Example: investing money in a car that is already deteriorating.

2. interpersonal escalation dilemmas: involves two or more people, often in a competitive relationship such as negotiation.

Example: Union Strikes, wars.

Generally speaking: People fall into escalation traps because initially the situation does not

appear to be a losing enterprise.

Example: Egyptian Revolution Jan 25, 2011 in Mubarak’s Perspective in the first days of its start.

Negative OutcomeOccurs

Reexamine Course of Action to Continue

Escalation of Commitment

Continue

DisContinue

Commit to Current Course

Withdraw and check BATNAs

End to satisfying

result

Avoid the escalation of commitment in negotiation

• set limits: a negotiator should have a clearly defined BATNA. Not to accept an offer worse than his/her BATNA.

• avoid decision myopia: a negotiator should get several perspectives on the situation. honest and critical assessment.

• recognize sunk costs: recognize “money” commitment previously spent that cannot be recovered.

• diversify responsibility and authority: in some cases, it is necessary to remove or replace the original negotiators from deliberations precisely because they are biased.

• Redefine the situation : helps not to look to the situation as “the same old problem” but a new one, thus helping to change the decision criteria.

4 main questions in this presentation

1. Discuss 2 of the 5 factors of Tit for Tat strategy’s effectiveness.

2. Discuss 2 differences between social and Prisoner’s Dilemma.

3. How to encourage cooperation in social Dilemma? Discuss 2 of the 5 principles.

4. Discuss 2 solutions of how to avoid escalation of commitment.

Thank You!