game theory in negotiations

Case study: game theory in negotiations with management

Dismissal is a natural and inevitable process. One brings relief, the other negative emotions. In both cases, there is a common point: when leaving, everyone wants to do it as profitably as possible. And this is a normal human reaction – leaving, pick up as much as possible.

When this client came with his request, he was extremely negative. It can be understood. The last 10 years in one company. I got settled there as a young boy after graduation to the initial position. Two months later he received the first increase, then again and again. At the age of 29, he already led a large retail region – is it a joke? He developed and implemented projects that allowed his company to become a market leader.

Game theory in negotiations

But to achieve such results, he gave a lot. Work 7 days a week almost around the clock, lack of holidays, rare communication with family, chronic fatigue, shaky health – these are the pay for success.

He could have earned much more by leaving the company but invested too much in it. Finishing the next project, which brought the company millions, the client found out that restructuring was coming, and his position would be abolished by the decision of the CEO. He was asked to choose: a position lower in his region or moving to another region with a promotion, but a noticeable reduction in wages. It was obvious to him and the company that the options would not suit him. It’s time to leave.

His world collapsed. He gave the company ten years and brought it multimillion-dollar revenues, and now it is no longer needed. He wanted revenge, “to take from them everything that they owe me.” This is a normal reaction, but unproductive. In business relations, there should be no place for emotions, only negotiations.

And here the game theory helped me.

Dismissal game theory method

Game theory is exploring ways to make the best move in negotiations and, as a result, to obtain more favorable conditions. She teaches us to analyze many factors and draw logical conclusions.

The theory of strategic games is well suited in any negotiations. But our task was to negotiate a profitable dismissal.

Prisoner’s Dilemma

“Berto and Robert were arrested for robbing a bank, failing to properly use a stolen car to escape. The police cannot prove that it was they who robbed the bank but caught them red-handed in a stolen car. They were led into different rooms and each was offered a deal: to hand over an accomplice and send him to jail for 10 years, and to be released himself. But if they both surrender each other, then each will receive 7 years. If no one says anything, then both will sit for 2 years only for car theft. ”

Every prisoner is a player. Accordingly, the benefit of each can be represented in the form of a “formula” (what both players will receive, or what the other player will receive).

For example, if I hit you, my winning scheme will look like this: I get a rough victory, you suffer from severe pain.

Practical application

When you and your company face difficulties that lead to the fact that the company is forced to part with you, then you become both Berto and Robert. The best strategy is to support each other. Therefore, both parties should strive to take care of each other. Winning is possible only in this case.

Manipulating, threatening, and capitalizing on a company’s detriment is a disastrous option. It is also failed because life on this dismissal does not end. The market for my client’s positions is very narrow, and all competitors would instantly know about his behavior. This could greatly spoil the business reputation and complicate his future career.

Battle of the sexes

This is a conditional name. Participants may well be of the same sex, and this will not change the essence of the game.

“Anjali and Borislav go on a date, but cannot choose between ballet and boxing. Anjali loves boxing because she likes it when blood spills to the joy of a screaming crowd of spectators who consider themselves civilized just because they paid for someone’s broken heads.

Borislav wants to watch the ballet, because he understands that the ballerinas go through a huge number of injuries and difficult training, knowing that one injury can put an end to everything. Ballet dancers are the greatest athletes on Earth. A ballerina can kick you in the head, but she never will, because her leg is much more expensive than your face. ”

Each of them wants to go to their favorite event, but they do not want to enjoy it alone. So we get a scheme for their winnings: the greatest value is to do what they like, the least is just to be with another person, and zero is to be alone.

Some people stubbornly choose the path of war. That is, no matter what, defend only their interests and their position, and let the opponent adjust and lose everything. But such a simplified strategy of games perfectly reveals fools.

Practical application

You and company management can seek compromises and smooth corners and come to a mutually beneficial solution. Or, both parties can refuse claims that are conflicting and proceed to negotiations on the third option. This option will preserve your business reputation and make it clear to company management that you are a competent negotiator in any circumstances.

Nash Equilibrium

“Let’s quickly divide $ 100. You and I decide how many out of hundreds we demand and at the same time voice the amount. If our total amount is less than a hundred, everyone gets what he wants. If the total amount is more than one hundred, the one who asked for the least amount receives the desired amount, and the more greedy person receives what is left. If we ask for the same amount, everyone gets $ 50. How much do you ask for? How do you split the money? There is only one winning move. ”

Calling $ 51 will give you the maximum amount no matter what your opponent chooses. If he asks for more, you will receive $ 51. If he asks for $ 50 or $ 51, you will receive $ 50. And if he asks for less than $ 50, you will get $ 51. In any case, there is no other option that will bring you more money than this. Nash equilibrium is a situation in which we both choose $ 51.

Practical application

This is probably the most perfect game. She teaches that it is not necessary to win in negotiations. And even more so do not need to harm others. It is enough to make the best move just for yourself, regardless of what your opponent is preparing for you.

Yes, it’s not easy. This is similar to a subtle game of chess.

But this scheme is ideal in family relationships when we unconsciously all the time endlessly strive for victory. But victory should not be humiliation or insult to a partner. Victory is when in the end it’s good for both.

My client accepted the need for productive negotiations and worked out a behavior strategy for himself. When he called me following the results of the conversation with the General Director, he himself was in a pleasant shock: the negotiations were positive, they agreed on mutually beneficial conditions, and besides, the General recommended him to another company for a higher position, where he later got a job.

Would it have happened if he had come to the general in the state in which he came to me? Hardly.

Yes, everyone suffered losses: the client lost his job in his beloved company, but the company also lost a productive employee.

But both sides, following the results of the negotiations, also received positive points: the company avoided the conflict of dismissal and the tarnished reputation that a displeased leader could create. And the client received material benefits and a new place of work.

But the main thing that I wanted to convey was the importance of communication and conversation, the pursuit of mutual benefit. Try to evade conflict, if possible, and translate negotiations into a productive plane. Only dialogue, only mutual benefit. Forget the “snatch everything” tactic. It is a failure initially and will not bring anything but losses, both moral and material.