“Game Theory in Negotiation: Understanding Prisoner’s Dilemma”
https://thebossmagazine.com/prisoners-dilemma-negotiation/
A recent article in Boss Magazine, titled “Game Theory in Negotiation: Understanding Prisoner’s Dilemma,” explores how game theory can be applied to social science, particularly the science of negotiating. The author defines game theory differently than we do in class, describing it as, “the study of a choice of strategies between intelligent, rational decision-makers.” Still, the idea is the same, the model helps us predict the outcomes of certain scenarios where an individual’s behavior is dependent upon the behavior of someone else. The author explains that when game theory is applied to negotiation it can help explain the results of certain negotiations and give insight to how one may alter their behavior to achieve a more favorable outcome.
The author writes that there are 30 games that explain all types of life scenarios, 3 of which we have discussed in lecture (Prisoner’s Dilemma, Hawk-Dove Game, and Penalty Kickers). He goes on to state that of the 30, 4 can be applied to negotiation practices, the most prominent being “Prisoner’s Dilemma.”
As we discussed in class, Prisoner’s Dilemma results in a situation in which both players may receive equal payoffs, one or the other receives a higher payoff, or they both receive low payoff (both lose). The best response for both players would be to choose a situation in which they get equal payoffs, their mutual best responses. The author explains that a Prisoner’s Dilemma situation occurs when there is choice for parties to make on whether or not they should uphold the agreed upon deal after a negotiation. The article gives the example of a business which has negotiated a preferential agreement for legal services with a law firm, but must uphold certain conditions to the deal. First, the law firm must only utilize top quality lawyers in handling the business. Second, the business may only use this law firm for all its legal requirements. Both parties must decide whether they will uphold their side of the deal, knowing that there is a good chance that they could benefit and hurt the other by choosing not to uphold it. The author explains that this kind of scenario could only exist if both parties have the opportunity to default.
The author then goes on to explain that the ways in which Prisoner’s Dilemma can play out often depends on the culture in which it is occurring. In Monochronic cultures, where people directly focus on one thing at a time, Prisoner’s Dilemma may occur in some scenarios. In Polychronic cultures, Prisoner’s Dilemma may be extremely damaging to a relationship if it is played because people may choose to stray from their path, sabotaging all trust and honor which is crucial to the deal. However, if there is no relationship, Prisoner’s Dilemma will likely occur.
The article ends by recognizing that the best way to deal with Prisoner’s Dilemma is to remove all opportunities for default. However, understanding when people are playing Prisoner’s Dilemma and using that to determine your conduct can be extremely beneficial.