Syllabus: Negotiating Strategy
Yale School of Management, Fall 2008

Books for Negotiating Strategy:

Required Books: Available at the bookstore or through these links:	Suggested books: These are good reference texts.

There are four books for this course in which there will be required reading, and several very good reference books that I suggest and will have available for borrowing in my office. I know this is a bit much, but these are all books I think you will enjoy having; I also don't mind if you share, and encourage you to shop for them used / online (their pictures are links to the books on Amazon.) The Art and Science by Raiffa and Negotiating Rationally by Bazerman are very good books which both cover the analytical treatment of negotiations analysis, and begin to explore what Social Psychology has to say about deviations from purely analytical bargaining. The book Influence by Cialdini is a quick read and full of examples of the psychology of persuasion, all of which are well grounded in the research literature (though the book is written in a breezy style.) Finally, Emotions Revealed by Ekman summaries a huge literature on non-verbal communication which is incredibly valuable to understand in strategic situations.

Of the suggested books, Getting to Yes by Fisher is the most readable, and is highly recommended. It emphasizes bargaining over "interests" rather than "positions," a recommendation that some find useful and that others ridicule. Telling Lies is another book by Ekman which focuses more on the signs and non-verbal cues of deceit. Kahneman is an incredible reference for understanding biases and the social psychology of judgment & decision making but is a bit overwhelming to read straight through and so is optional; buy this if you really want to delve into the social psychology of judgment making. Osborne is a bit technical, but a terrific treatment of the formal models we will look at in class (and a great reference book.) All of these books are strongly suggested for those taking the course. Amazon now lets you browse through the table of contents and excerpts of these books, click the author or the book cover to take a look.

You can also search several other used book sites by going to isbn.nu.

Grading for Negotiating Strategy:

Grading for this course will comprise two equally weighted parts. Half of student grades will be determined by performance on a short-essay final exam. The other will be determined by class participation as judged by the TA, the instructor, and an online evaluation by the students in the course.

Class Schedule:

Note: Class schedule may be rearranged in order to accommodate guest speakers

Thu Sep 4: Course Overview and Approach

Today's Agenda:
The use of Game Theory in Negotiation Analysis
When game theory goes wrong: integrating psychological observations.
Introducing my research
Course structure, presentations and Grading
Office Hours and TAs

Powerpoint Slides: Click here.

Tue Sep 9: Bilateral Bargaining: Offers, Counter-Offers & Ultimatums

Readings for Today:
Raiffa, pages 7-25

Optional:
Osborne & Rubinstein, Chapter 1. Read if you want to prepare a bit for the formal notation of the course.

Today's Agenda:
The Ultimatum Game.
Issues of Fairness and Distributive Justice (to be continued)
The Rubinstein Model of Alternating-Offer Bargaining.

Powerpoint Slides: Click here.

Thu Sep 11: Bilateral Bargaining: the Nash Solution

Readings for Today:
Raiffa, pages 35-65, or
Bazerman pages 67-88

Optional:
Lesson on the Ultimatum game from Professor Nalebuff's life: "The Sophisticates Abroad".
Osborne & Rubinstein, Chapter 7. Read if you want a full treatment of the Rubinstein Model.

Today's Agenda:
Quick Review of Alternating Offers Bargaining
BATNA and ZOPA.
Different types of Scoring Rules / Preferences
The Nash Bargaining Solution / Introduction to axiomatic bargaining
Connection with Alternating-Offers Model

Powerpoint Slides: Click here.

Tue Sep 16: Fairness, Bargaining, and Framing Effects.

Readings for Today:
Sally Swansong / Prepare to run Monday by reading your part of the case (if you've forgotten, flip a coin.)
Raiffa Ch. 6, The Role of Time
Kahneman, Knetsch & Thaler: Fairness as a Constraint on Profit Seeking
Bohnet & Zeckhauser: Social Comparisons in Ultimatum Bargaining

Optional:
Neelin, Sonnenschein & Spiegel: A Further Test of Noncooperative Bargaining Theory
Ochs & Roth: An Experimental Study of Sequential Bargaining
Osborne & Rubinstein, Chapter 15. A thorough treatment of the Nash Solution.

Today's Agenda:
Sally Swansong
Finish up the Nash Solution
Fairness and the Ultimatum Game
Begin Coalitional Analysis

Powerpoint Slides: Click here.

Thu Sep 18: Multi-Lateral Bargaining: Fairness, the Core and Coalitional Analysis

Readings for Today:
Raiffa, pages 251-274 & 288-299

Optional:
Bazerman, pages 127-139
Svejnar: "Bargaining Power, Fear of Disagreement and Wage Settlements" (this paper is hard but fascinating, give it a shot and don't worry if some of the more technical stuff blows by you.)
Osbourne & Rubinstein, Chapter 13. An Introduction to Coalitional Bargaining

Today's Agenda:
Begin Coalitional Analysis
The Card Game
The Core
Continue Fairness, Fair Division Theory

Powerpoint Slides: Click here.

Tue Sep 23: Controlling Time and Information

Readings for Today:
Bazerman, Chapter 11, Creating Integrative Agreements p. 89-101
Raiffa (not from the book,) "Post-Settlement Settlements"

Today's Agenda:
Nash Bargaining
Negotiating under time pressure
Focusing Negotiations, market prices and shrouded prices
Post-Settlement Settlements

Thu Sep 25: Multi-dimensional and Multi-Party Negotiations

Readings for Today:
Raiffa, Tradeoffs and Concessions: pages 148-165
Look ahead and begin the large body of Social-Psychology readings

Optional:
Levin & Nalebuff: An Introduction to Vote-Counting Schemes
Thompson: An Examination of Naive and Experienced Negotiators (about coming to integrative agreements.)

Today's Agenda:
Coalitions
Voting, strategy, medians and means

Powerpoint Slides: Click here.

Tue Sep 30: Negotiation and Contracts—Rules of the Road

Readings for Today:
Read and Negotiate Viking Investments
Viking Investments: Role of Pat, and the Role of Sandy (remember to only look at your role, given out in class.)
Raiffa: Ch 13, Risk Sharing and Insecure Contracts, p. 187-204

Today's Agenda:
The Viking Case
Contracts
Last Look or Meet-the-Competition
Right-of-first-refusal
Take-or-pay
Most-favored Nation
Texas Shoot Out.

Thu Oct 2: Introduction to Biases and Rationality: Preferences, Inconsistencies and Behavioral Anomalies

Readings for Today:
Please read the abstracts of all required papers, then the bolded paper in full.

Gains, Losses, & Risk
Finucane Alhakami Slovic & Johnson, Affect in Judgments of Risk and Benefit, Journal of Behavioral Dec Making, 2000
Isen Nygren & Ashby, Affect and Subjective Utility, Journal of Personality and Social Psychology, 1988
Kahneman Lovallo, Timid Choices & Bold Forecasts, Management Science, 1993
Kahneman & Tversky, Prospect Theory, Econometrica, 1979

Slides from class: first section and second section.

Fairness, Procedures, & Bargaining
Charness & Levine, A Study of Intentions, Working Paper, 2003
Drolit & Morris, Rapport in Conflict Resolution, Journal of Experimental Social Psychology, 2000
Loewenstein Thompson and Bazerman, Social Utility, Interpersonal Relations and Group Processes, 1989
Larrick & Blout, The Claiming Effect, Journal of Personality and Social Psychology 1997

Slides from class: first section and second section.

Knowledge, Thinking, Satisfaction, & Regret
Camerer, Lowenstein, & Weber, The Curse of Knowledge, The Journal of Political Economy, 1989
Wilson & Schooler, Thinking Too Much, Journal of Personality and Social Psychology, 1991
Medvec, Madley & Gilovich, Counterfactual Thinking & Satisfaction, Journal of Personality and Social Psych, 1995
Larrick & Boles, Avoiding Regret in Decisions, Organizational Behavior& Human Decision Processes, 1995

Slides from class: first section and second section.

Kahneman Knetch & Thaler, Anomalies, The Journal of Economic Perspectives, 1991

Optional:
Chen, Give Unto Others, Proceedings of the Royal Society, 2003
Kahneman Knetch & Thaler, Fairness and the Assumptions of Economics, The American Economics Review, 1986

Today's Agenda:
Social Comparisons
Claiming Effect
Biased-Social Comparisons
Implications for offers
Structural and Heuristic Explanations
Anonymity and quasi-magical thinking
Learning
Prospect Theory and Heuristics for Evaluation
Prospect Theory / Regret
Framing Effects and Mental Accounting
Affective Forecasting Errors
Anchoring

Tue Oct 7: Biases and Rationality: Belief Formation

Readings for Today:
Please read the abstracts of all required papers, then read at least one full paper from each section.

Self-Serving Biases
Babcock & Loewenstein, Explaining Bargaining Impasse, The Journal of Economic Perspectives, 1997
Farber & Bazerman, Divergent Expectations & Disagreement, The Quarterly Journal of Economics, 1989
Babcock Wang & Loewenstein, Choosing the Wrong Pond, The Quarterly Journal of Economics 1996
Pogarsky & Babcock, Motivated Anchoring and Bargaining Impasse, The Journal of Legal Studies, 2001

Slides from class: first section and second section.

Confirmatory Bias & Divergent Beliefs
Gentzkow & Shapiro, Media, Education & Anti-Americanism, Working Paper
Loewenstein & Moore, Information, Fairness& Bargaining Efficiency, Working Paper 2000
Sherman & Cohen, Self-Affirmation and Defensive Biases, Current Directions in Psychological Science, 2002

Slides from class: first section and second section.

False Consensus, Partisanship, & Mispercieving Others
Gilovich, Differential Construal and False Consensus, Journal of Personality and Social Psychology, 1990
Robinson Keltner Ward and Ross, Naive Realism in Intergroup Conflict, Journal of Personality and Social Psychology 1995
Gilbert & Malone, The Correspondence Bias, Psychological Bulletin 1995
Morris Larrick & Su, Misperceiving Negotiation Counterparts, Journal of Personality and Social Psychology, 1999

Slides from class: first section and second section.

Optional:
Hill & Sally, Autism, Theory of Mind, Cooperation & Fairness, Working Paper, 2003
Wolfers, Divorce Laws and Divorce Rates, Working Paper, 2003

Today's Agenda:
Heuristics and Biases in Bargaining
Overconfidence
Confirmatory Bias
Under-gathering Information
Risk Assessment
Divergence in Beliefs
Self-Affirmation
Self-Serving Biases
The Role of Affect
The role of information structure
Related: Curse of Knowledge
False Consensus Effect
Efficiency Gains?
Fundamental Attribution Error and Correspondence Bias
Social Attribution Biases
Implications for Structuring Negotiations
Issue-by-issue versus all at once

Thu Oct 9: Negotiations in Trust Relationships and Law
Visiting Lecturer: Richard Brooks, Yale Law School

Readings for Today:
Cases. These are short, but read carefully; Richard will ask questions about the facts in these cases.
Hill vs. Jones, Jackson Vs. Seymour, Laidlaw vs. Organ, Stowman vs. Carlson, Vai vs. BoA. MacNeil and Kessler are good introductions to Contract Law (what negotiating parties can and can not agree to, and what they legally owe each other,) these should be skimmed.
Professor Brooks will be talking about his recent work on negotiating corporate breakups, the Hoberman piece is background reading in this literature. Please skim it, taking away intuition and ignoring the technical parts.

Today's Agenda:
Contract Law and Negotiations: What we owe each other
Negotiating at Arms Length
When is an offer not an Offer?
Court Remedies
Implications for the Negotiating Stage

Tue Oct 14: Influence and Culture

Readings for Today:
Influence, Chapter 1&2 - Weapons of Influence & Reciprocation
Cohen, Nisbett, Bowdle & Schwarz: Insult, Aggression, and the Southern Culture of Honor
Thompson, Getner & Loewenstein: Avoiding Missed Opportunities and Analogical Training (paper Barry mentioned)

Optional: Please read the abstracts of all these papers and skim the initial sections if any of them are confusing.
Sims & Baumann: The Tornado Threat: Coping Styles of the North & South (look at tables 2 & 3)
Henrich et al: Economic Man in Cross-Cultural Perspective: Behavioral Experiments in 15 Small-Scale Societies
Gurin, Gurin & Morrison: Personal and Ideological Aspects of Internal & External Control
Miyamoto & Kitayama: Cultural Variation in the Correspondence Bias

Today's Agenda:
Persuasion & Influence: the Effect of Reciprocation
Cultural, Economics & Racial Differences in Perception, Ethics & Beliefs

Powerpoint Slides: Click here.

Thu Oct 16: Lying, Ethics, & Wrapup

Readings for Today:
Ekman: Lying and Nonverbal Behavior, (How to tell when someone is lying)
Ekman: Lying and Deception
Raiffa: Ch. 25, Ethical and Moral Issues.

Optional:
Kolb & Coolidge: Gender Issues in Negotiations
Ekman: Facial Expressions

Today's Agenda:
Wrapup.

Powerpoint Slides: Click here.