R4. Tradeoffs and concessions.pdf

An additive scoring system sometimes falls far short

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An additive scoring system sometimes falls far short of what is reasonable. This may be a result of the interdependence between factors, an extreme example being the case where preference rank- ing of levels within one factor depends on the level of another fac-
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154/ TWO PARTIES, MANY ISSUES toro For example, the better the military defenses of an ally of Coun- try X, the better offCountry X will be; however, X's preferences for the ally's military defenses (the more the better) might reverse (to the less the better) if the level of their friendship slips below sorne critical point. Factors may also be interdependent when there is a need for bal- ance or equity. Suppose that you are a negotiator, acting in a benev- olent way so as to favor two groups (A and B) internal to your side. For any contract you negotiate, you are primarily concerned with the benefits to groups A and B. For political reasons you must make sure, however, that the benefits to A are commensurate with those accruing to B. The value of an increase in benefits to A may depend critically on the level ofbenefits to B; indeed, ifbenefits to B are at a very low level, the increase in already high benefits to A may be deemed undesirable. An additive scheme that scores the benefits independently for A and for B and adds these together misses the need for balance. In cases such as these, a nonadditive scoring system can be used. Nonadditive systems are not too difficult for current state-of-the-art measurement, but they are too difficult and too involved to be di s- cussed heTe. Suffice it to say that often there may be many factors under consideration, but only a few will be interdependent; nego- tiators can derive advantage from grouping them together and treat- ing them as one composite factor in an othelwise additive scheme. . VALUE AND UTILITY FUNCTIONS Researchers sometimes distinguish between a value scoring scheme and a utility scoring scheme (see Keeney and Raiffa, 1976), but this distinction is not standard. In the case involving cost, time, and quality, the scoring system, as we have seen, allows you to as- sign an overall numerical value to any contracto The scoring system has been tuned in such a way that contracts with higher scores are prefe rred. No uncertainties are involved. Such a system can be caBed a value scoring system. Now suppose that you must decide between a compromise con- tract ($4 million, 350 days, quality 2) and a gamble in which, witb equal probability, you could end up wíth the best contract ($3 mil- lion, 250 days, quality 1) or with the worst contraet ($4.5 million, TRADEOFFS AND CONCESSIONS /155 400 days, quality 5). The value scores of the best and worst eon- tracts are, respectively, 100 and O, and therefore the gamble has an expeeted value return of -50. But regardless of what the numbers imply, you might strongly prefer the certainty of the contract with a score of 48.5 to the uncertainty of the gamble with the higher ex- pected score of 50. This is not surprising, beeause the scoring sys- tem was constructed on the basis of nongambling tradeoff
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