The Art and Science of Negotiation

Howard Raiffa

• Publisher: Belknap Press
• Year: 1985
• ISBN:
  9780674255661
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

Whether you are selling a house, closing a business deal, settling a divorce, arbitrating a labor dispute, or trying to hammer out an international treaty, Howard Raiffa's new book will measurably improve your negotiating skills.Although it is a sophisticated self-help book—directed to the lawyer, labor arbitrator, business executive, college dean, diplomat—it is not cynical or Machiavellian: Raiffa emphasizes problems and situations where, with the kinds of skills he aims to develop, disputants can achieve results that are beneficial to all parties concerned. Indeed, he argues that the popular "zero-sum" way of thinking, according to which one side must lose if the other wins, often makes both sides worse off than they would be when bargaining for joint mutual gains.Using a vast array of specific cases and clear, helpful diagrams, Raiffa not only elucidates the step-by-step processes of negotiation but also translates this deeper understanding into practical guidelines for negotiators and "intervenors." He examines the mechanics of negotiation in imaginative fashion, drawing on his extensive background in game theory and decision analysis, on his quarter-century of teaching nonspecialists in schools of business and public policy, on his personal experiences as director of an international institute dealing with East/West problems, and on the results of simulated negotiation exercises with hundreds of participants.There are popular books on the art of winning and scholarly books on the science of negotiation, but this is the first book to bridge the two currents. Shrewd, accessible, and engagingly written, it shows how a little analysis sprinkled with a touch of art can work to the advantage of any negotiator.

part

I

Overview

There is no shortage of disputes. There are disputes between husband and wife, between siblings, between friends, between individual and firm, between firm and firm, between developer and environmentalist, between regions within a nation, between a region or city or state and the nation, between nation and nation—and perhaps in the far future (who knows?) between planet and planet.

There are many established ways for settling disputes: traditions, regulations, courts, markets (through the laws of supply and demand), and negotiations. Even the staunchest free-market capitalist acknowledges the fact that markets may be imperfect and that governments must often modify the rules of market behavior to achieve more socially efficient outcomes. But how should the authorities change these rules? Frequently by the processes of bargaining and negotiating.

It’s important for me to state at the outset that I am not against conflict per se. Progress is often achieved by engaging uninvolved individuals in a cause, and the creation of tension and conflict may be a desirable organizing strategy. Some major societal improvements have resulted from conflicts that have been resolved by destructive forces. Competitive sports, parlor games, and card games are conflicts that are designed to add zest to life. Competition for advancement in the business world and competition among firms generate incentives that help the system work more efficiently. All that granted, this book is concerned with situations in which two or more parties recognize that differences of interest and values exist among them and in which they want (or in which one or more are compelled) to seek a compromise agreement through negotiation.

There is an art and a science of negotiation. By “science” I loosely mean systematic analysis for problem solving; and if the phrase “systematic analysis” seems a bit vague, I can only say that its meaning will become clearer as we go on. The “art” side of the ledger is equally slippery: it includes interpersonal skills, the ability to convince and be convinced, the ability to employ a basketfull of bargaining ploys, and the wisdom to know when and how to use them. The art of negotiation has been well documented throughout the ages; the science, on the other hand, is not well developed, and what has been developed is not very accessible to the practitioner. My aims here are to explain in relatively nonmathematical language some of the science (theory) that has been developed by others, to develop a bit more of my own, to sprinkle in a little art, and to show how art and science can interact synergistically.

Often disputes are not settled amicably, and all sides suffer: children fight each other, husband and wife separate, labor and management settle grievances through strikes, and nation-states resolve their differences through wars. Agreements often are not made when they could have been made to the advantage of all disputants. Agreements often are made that are inefficient: others could have been made that would have been preferred by all the disputants.

It is my belief that many disputes could be more efficiently reconciled if the negotiators were more skillful. Other disputes are best reconciled through the efforts of intervenors. In labor-management relations there are reasonably trained—but usually not well enough trained—mediators and arbitrators. Ideally these are impartial, highly ethical, knowledgeable intermediaries who help the disputants negotiate constructively, perhaps by suggesting compromises, and, depending on their role, perhaps by dictating compromises—a bit like a wise parent helping quarrelsome children. Such intermediaries also exist to help counsel families. It is very rare, however, to find well-trained intervenors who can help with serious societal conflicts, such as those between urban interest groups, between developers and environmentalists, between nation-states. Managers likewise seldom receive instruction in negotiating skills as part of their professional education, although they are often called upon to mediate or arbitrate in disputes that occur among their subordinates.

I believe that more training is desperately needed in the art and science of negotiating, and in the art and science of intervening. Such training would be appropriate for diplomats, military officers, lawyers, politicians, businessmen, and ordinary citizens who may expect at some time or other to be embroiled in situations with serious conflicts of interest among contending parties. It should include instruction not only in the art of interpersonal relations, but also in analytical, problem-solving skills.

This book will therefore blend discussion of the practical side of negotiating with simple mathematical analysis, both of which can be of use to disputants and intervenors alike. We’ll begin with a brief look at the various types of disputes and at the ways in which researchers have chosen to explore the field.

1

Some Organizing Questions

Early in my research I had the grandiose idea of devising a taxonomy of disputes, in which the listing would be reasonably exhaustive and in which overlaps among categories would be rare. This was possible, I found, only after developing a host of abstract constructs—and even then the taxonomy was not very useful. For our purposes here, and to give a flavor of the sweep of topics to be discussed, a partial classification will be sufficient. We’ll do this by identifying the important characteristics of each type of dispute.

ARE THERE MORE THAN TWO PARTIES?

There is a vast difference between conflicts involving two disputants and those involving more than two disputants. Once three or more conflicting parties are involved, coalitions of disputants may form and may act in concert against the other disputants. Without any intention of being frivolous, many writers talk about a conflict situation (be it economic, political, or military) as a “game,” the disputants as “players of the game,” and strategic analysis as “game theory.” Game theorists have long made a distinction between two-person games and many-person games, where “many” is interpreted as greater than two. The Law of the Sea is one example of a game with many players; the Group of 77 (in reality, some 114 developing nations) is one reasonably stable coalition of players in this game.

There are conflict situations in which the disputing parties are not well specified. Consider a dispute between a developer and a group of disturbed citizens who can organize themselves into negotiating entities but have not yet done so. A group may form, but during negotiations its members may not agree among themselves and may splinter into subgroups, each demanding representation in the negotiations.

At other times, well-specified negotiating parties might jointly decide who else should be invited to join them at the conference table; thus, part of the negotiations may be taken up with deciding just who is to negotiate.

ARE THE PARTIES MONOLITHIC?

When U.S. ambassador Ellsworth Bunker negotiated the Panama Canal Treaty with his counterpart from Panama, three agreements had to be made: one across the table (United States and Panama), one within the U.S. side, and one within the Panamanian side. Bunker spent much less time negotiating externally than he did internally within the United States, where there were vast differences of opinion—differences among the Department of Defense, the Department of State, the Department of Commerce, the Department of Transportation, and so on. It is a delicate and highly intricate matter to be able to synchronize external and internal negotiations. On the internal side, the president of the United States and his ambassador play a role not unlike that of a mediator, but a mediator with “muscle” or “clout.”

Far from being exceptional, it is commonly the case that each party to a dispute is not internally monolithic: each party might comprise people who are on the same side but whose values differ, perhaps sharply—and even if one side consists of only a single person, that person might still experience internal conflicts. I am not implying that the diversities that exist internally within each team make bargaining more difficult between the teams; indeed, the more diffuse the positions are within each side, the easier it might be to achieve external agreement. But I do wish to emphasize how important it is in discussing negotiation to be aware of internal as well as external conflicts.

IS THE GAME REPETITIVE?

When people haggle in a bazaarlike fashion over such one-time issues as the price of a used car or the price of a home, each disputant may have a short-run perspective that may tempt him to exaggerate his case. Contrast this type of negotiation with those cases in which the bargainers will bargain frequently together in the future and in which the atmosphere at the conclusion of one bargaining session will carry over to influence the atmosphere at the next bargaining session. When bargaining is repetitive, each disputant must be particularly concerned about his reputation, and hence, luckily for society, repetitive bargaining is often done more cooperatively (and honestly) than single-shot bargaining. But this is not always so: with repetition there is always the possibility that some inadvertent, careless friction can fester and spoil the atmosphere for future bargaining; this is especially true where there are differences in the information available to both sides. With repetition, a negotiator might want to establish a reputation for toughness that is designed for long-term rather than short-term rewards.

ARE THERE LINKAGE EFFECTS?

When the United States in the 1970s negotiated a contract with the Philippines about military base rights, the negotiators had to keep in mind similar contracts and treaties that were pending elsewhere, such as in Spain and Turkey. One negotiation becomes linked with another. Repetitive games also involve linkages that arise from repetitions with the same players over time.

The U.S. Senate, in discussing the SALT II treaty, linked these negotiations to other negotiations on defense spending. In grain negotiations with the Soviet Union, the United States threatened to link food with oil.

One must be aware of the intricacies caused by linkages and, to put it more positively, one must use linkage possibilities to break impasses in negotiations. This is not done creatively enough in most disputes.

IS THERE MORE THAN ONE ISSUE?

In selling or buying a house, a car, or even a firm, the critical issue is the final price of the transaction. This is the case even in some labor-management disputes in which the wage rate may be the overwhelmingly dominant factor. One side wants a higher settlement value; the other side, a lower settlement value. The sides are in direct conflict. Of course, both might prefer some reasonable settlement to no settlement at all.

In most complicated conflicts there is not one issue to be decided, but several interacting issues. There are virtually hundreds that must be resolved in the Law of the Sea conferences. Some of the issues are economic; others are political; others have military considerations. Each side, in comparing possible final agreements, must carefully examine and thrash out its own value tradeoffs—and one must remember that each side may not be monolithic and that these tradeoffs do not usually involve naturally commensurable units. The point is that disputants are engaged in a horrendously difficult analytical task in which there is vast room for cooperative behavior. When there are several issues to be jointly determined through negotiation, the negotiating parties have an opportunity to considerably enlarge the pie before cutting it into shares for each side to enjoy. Negotiations rarely are strictly competitive, but the players may behave as if they were competitive; the players might consider themselves as strictly opposed disputants rather than jointly cooperative problem solvers.¹

The parties may start their negotiations by trying to decide what will be at stake. But often they may need to be flexible; they may want to introduce new issues or eliminate old ones as part of the negotiation process. Thus, one issue in the negotiations may be to determine just what issues should be included in the negotiations.

IS AN AGREEMENT REQUIRED?

If a potential seller and buyer of a house cannot agree on a price, they can break off negotiations. During negotiations each has a mild threat: he can simply walk away. Contrast this case with the case of a city that is negotiating a complex wage settlement with its police force or firemen. By law a contract must be settled by a given date. True, the parties might delay and miss critical deadlines, but eventually they must settle on an agreement. When contracts have to be made, the parties might be required by law to submit their cases for mediation and arbitration.

If an agreement is not required—or not required at a particular stage of negotiation—each party must contemplate what might happen if negotiations were to be broken off. If this were to occur, each party would face a complex decision problem under uncertainty, and the negotiator would have to somehow figure out just how much he must get in the negotiations before he would be indifferent between settling for that amount or breaking off negotiations. This phase of analysis—the determination of a minimal return that must be achieved in negotiations—is usually done very poorly in practice.

Even in those cases where, by law, contracts eventually have to be agreed upon, negotiations may be protracted, and at any stage a negotiator might want to think about a rock-bottom position for acceptability of a contract at that particular point. “If you can’t get this much at this time, then break off negotiations until next week”—so go the instructions.

IS RATIFICATION REQUIRED?

Whenever the United States signs a treaty with another nation, the U.S. Senate must ratify it before it becomes binding. Analogously, a union leader might settle on a contract with management, but before it becomes operative the union rank-and-file must ratify the agreement. Further last-minute concessions might be squeezed out of the other side during this ratification process: “salami” tactics—one slice more. What is even more important, the ratification process might strengthen the side requiring it—but, of course, it might also make negotiations much less flexible and less amicable, and might stiffen the resolve of the other side.

In some circumstances, negotiators themselves may artificially create a ratification requirement. For example, a corporation president, while having the authority to commit his firm to an agreement, might say to the other negotiator, “Of course, this agreement is acceptable to me, but my board of directors will have to ratify it.” Once again, this ploy might adversely affect the atmosphere of the negotiations.

ARE THREATS POSSIBLE?

If the buyer of a house objects to the price offered by the seller, the buyer can threaten to walk away. This is called the fixed threat to go back to the status quo, ex ante. Contrast that situation with the case where a party says, “If you do not agree with my offer, not only will I break off relations, but I will take the following actions to hurt you.” Certainly the power of threats can influence outcomes, but if used crassly it can also stiffen opposition. Indeed, it can be demonstrated in laboratory situations that increasing the power of one side (everything else being equal) might empirically result in poorer outcomes for that side (and usually for the other side as well). Power is often not used artfully.

Again, these headings are not distinct—since threats by their very nature tend to link problems, and problems are often linked in order to make threats possible and credible.

ARE THERE TIME CONSTRAINTS OR TIME-RELATED COSTS?

When the United States ...

Table of contents

• Cover
• Title
• Copyright
• Acknowledgments
• Contents
• Prologue
• Part I: Overview
• Part II: Two Parties, One Issue
• Part III: Two Parties, Many Issues
• Part IV: Many Parties, Many Issues
• Part V: General Concerns
• Epilogue
• Bibliography
• Index