This paper is about negotiations and the game theory. Negotiation has been since ever omnipresent. It can confront us in our daily life, for example the question who is doing the dishes today or in much more complex is-sues, such as in economics or politics. "Simply defined, negotiation is the process of attempting to get what one wants, through agreement with one or more other par-ties." There are different tools with which negotiations can be modeled. One of them is game theory. "GAME THEORY aims to help us understand situations in which decision-makers interact. A game in the everyday sense - a competitive activity in which players contend with each other according to a set of rules." According to the definition, game theory is an appropriate tool to apply for negotiations and get the best outcome of it. It can make it easier for us to analyze our own needs, the least acceptable agreement, and desires, the most desired outcome, but also the ones of our opponent. Consequently, game theory allows us to estimate the strategy the other party is going to use.
Moreover, game theory reaches back far in history. There had been recognized some game theoretic situations even in the bible. But the major development started in the 1920s. First, game theory was a mathematic discipline. The two mathematicians, John von Neumann and Emile Borel worked on game theory and subsequently the book Theory of games and economic behavior was published by von Neumann and Oskar Morgenstern in 1944. Later, in the 1950s, game theory was not only considered to be a mathematician discipline, but it has been also applied in "economic theory and political science, and psychologists began studying how human subjects behave in experimental games."
Table of Contents
- 1 Introduction
- 2 Examples of Game Theories
- 2.1 Zero-Sum Games
- 2.2 Nonzero-Sum Games
- 2.3 Extensive Form Games
- 2.4 Cooperative Games
- 2.5 Bargaining Games
- 3 Conclusion
- 4 Literature
Objectives and Key Themes
The objective of this text is to provide an introduction to game theory and its application in negotiations. It aims to explain core concepts of game theory through examples and illustrations, making the subject accessible and relevant to understanding real-world negotiation situations.
- The nature and definition of negotiation
- Introduction to game theory as a model for negotiations
- Different types of games: zero-sum and nonzero-sum
- Examples of game theory applications in various contexts
- Strategies within games and their implications
Chapter Summaries
1 Introduction: This introductory chapter defines negotiation as a process of achieving desired outcomes through agreement with other parties. It introduces game theory as a valuable tool for modeling and analyzing negotiation situations, highlighting its historical development and its application across various fields such as economics and political science. The chapter establishes the context for understanding the subsequent examples and discussions of specific game types.
2 Examples of Game Theories: This chapter provides an overview of several key game theory models. It begins with zero-sum games, characterized by one party's gain equaling another's loss, illustrated by the example of "Matching Pennies." The chapter then transitions to nonzero-sum games, where the gains and losses of different players are not necessarily opposites. The "Prisoner's Dilemma" and the "Battle of the Sexes" are used as compelling examples to showcase the complexities of non-zero sum games and the concept of dominant strategies, where individual interests may lead to suboptimal outcomes for all players involved. The chapter emphasizes the applicability of these models to economic scenarios such as product launches and duopolies.
Keywords
Negotiation, game theory, zero-sum games, nonzero-sum games, Prisoner's Dilemma, Matching Pennies, strategy, dominant strategy, cooperation, conflict, economic applications, decision-making.
Frequently Asked Questions: A Comprehensive Language Preview
What is the purpose of this text?
This text serves as a comprehensive introduction to game theory and its applications in negotiations. It aims to explain core concepts clearly and accessibly, using examples to illustrate how game theory applies to real-world negotiation scenarios.
What topics are covered in the text?
The text covers a range of topics within game theory, including the definition of negotiation, the introduction of game theory as a negotiation model, different types of games (zero-sum and non-zero-sum), examples of game theory applications, and the analysis of strategies and their implications. Specific game examples like the Prisoner's Dilemma and Matching Pennies are analyzed in detail.
What is the structure of the text?
The text is structured with an introduction, a section dedicated to examples of game theories (including zero-sum, non-zero-sum, extensive form, cooperative, and bargaining games), a conclusion, and a literature section (although the provided preview doesn't include the literature itself). Each chapter is summarized within the preview.
What types of games are discussed?
The text explores various game types, focusing particularly on zero-sum games (where one player's gain equals another's loss, illustrated by "Matching Pennies") and nonzero-sum games (where gains and losses aren't necessarily opposites, illustrated by the "Prisoner's Dilemma" and "Battle of the Sexes"). The preview also mentions extensive form, cooperative, and bargaining games.
What are the key concepts explained?
Key concepts include the nature of negotiation, the application of game theory as a model for negotiations, the differences between zero-sum and non-zero-sum games, the implications of different strategies (including dominant strategies), and the analysis of cooperation and conflict within game theory models.
What are the key examples used?
The text uses several well-known game theory examples to illustrate concepts, including the "Prisoner's Dilemma," "Matching Pennies," and "Battle of the Sexes." These examples are used to show the complexities of decision-making in various negotiation scenarios.
What are the key words associated with this text?
Keywords include: Negotiation, game theory, zero-sum games, nonzero-sum games, Prisoner's Dilemma, Matching Pennies, strategy, dominant strategy, cooperation, conflict, economic applications, and decision-making.
Who is the intended audience for this text?
While not explicitly stated, the text's clear explanations and use of examples suggest it's aimed at an audience with limited prior knowledge of game theory, possibly students or professionals interested in learning about negotiation and decision-making.
Where can I find more information?
The preview includes a section for literature, although the specific references are not provided in this preview. The full text would presumably contain a more detailed bibliography.
- Quote paper
- Elena Ristova (Author), 2014, Negotiations and Game Theory. Understanding situations in which decision-makers interact, Munich, GRIN Verlag, https://www.grin.com/document/703072
