R4. Tradeoffs and concessions.pdf

Coherently and rationally your adversaries in

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coherently, and rationally, your adversaries in alllikelihood will Jtól with very limited rationality. Don't be naive and expect them to l)t>, have like you may want to behave. However, if they are prone ~. the gambler's fallacy; to an excessive zeal for certainty, to an tol' cessive avoidance of potential ex post regret, to misperceptions >:ti small probabilities (one could come up with a litany of so-call<:'>: nonrational, descriptive behaviors), then you might be able to t"L' ploit such behavior in negotiations. TRADEOFFS WITH TWO CONTINUOUS ISSUES Mr. Hee and Ms. Shee are negotiating over two continuous issllt,,,. cost and time. The ranges under discussion are $3.0-4.5 millic.,l, and 250-400 days. He wants high dollars and high days; she want., low dollars apd low days. Figure 26 indicates by means of indifTc:::,z· ence (iso-value) curves their respective tradeoffs. He, for exampit: deems contracts V, Q, and P equally desirable, and thus they are (~.t his same iso-value curve; he prefers contract R to any of the vallii:~ equivalent contracts V, Q, and P, and hence R is on a higher ¡SoY- value curve. He wants to go northeasterly; she southwesterly. Let'! suppose that they have tentatively settled on a contract agreeme.,OOi of $4.0 million and 275 days, which is depicted as point Pan':, which is scored 20 for him and 50 for her (see Figure 27). Notice from Figure 26 that if the final contract were to be mO\'6::: from point P along Mr. Hee' s iso-value contour (along the are PQ\'\ 3. See Raiffa (1968) and Kahneman and Tversky (1979). 60 400 ~ rn >. ~ 350 á ~ e t.:: 300 I I I 250 I 85 70 1 50 30 3.0 3.5 4.0 4.5 Cost (in millions of dollars) ¡ngure 26. Iso-value curves for Mr. Hee (solid lines) and Ms. Shee (bro- kn lines). Her direction of preference is southwest; his is northeast. lOOr 75 ~ ~ ...c: Vl ..; ~ 50 .. ~ ~ 8 Vl 25 o 25 50 75 100 Score for Mr. Hee figure 27. The efficient frontier. (Point P represents theioint scores for a
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