Negotiation theory

The foundations of negotiation theory are decision analysis, behavioral decision making, game theory, and negotiation analysis. Another classification of theories distinguishes between Structural Analysis, Strategic Analysis, Process Analysis, Integrative Analysis and behavioral analysis of negotiations. (rkessler06)

To borrow definitions from Howard Raiffa, decision analysis studies how an analytically inclined individual should and could make wise decisions; behavioral decision making examines the psychology of how ordinary individuals do make decisions; game theory focuses on how groups of ultra-smart individuals should make separate, interactive decisions; and negotiation analysis considers how groups of reasonably bright individuals should and could make joint, collaborative decisions. These theories are interleaved and should be approached from the synthetic perspective.

Common Assumptions Of Most Theories
Definitions of most concepts in Social Sciences are disputed, that holds also true for negotiations. There is no common and shared definition of what a negotiation is. Zartman defines negotiation as "a process of combining conflicting positions into a common position under a decision rule of unanimity, a phenomenon in which the outcome is determined by the process."

However, most theories of negotiations share the notion of negotiations as a process. Yet, they differ in their description of the process. Structural Analysis considers this process to be a power game. Strategic analysis thinks of it as a repetition of games (Game Theory). Integrative Analysis prefers the more intuitive notion of process, in which negotiations undergo successive stages, e.g. pre-negotiation, stalemate, settlement. Especially structural, strategic and processual analysis build on rational actors, who are able to prioritize clear goals, are able to make trade-offs between conflicting values, are consistent in their behavioural pattern, and are able to take uncertainty into account.

Negotiations differ from mere coercion, in that negotiating parties have the theoretic possibility to withdraw from negotiations. It is easier to study bi-lateral negotiations, as opposed to multilateral negotiations.

Structural Analysis
Structural Analysis is based on a distribution of empowering elements among two negotiating parties. Structural theory moves away from traditional Realist notions of power in that it does not only consider power to be a possession, manifested for example in economic or military resources, but also thinks of power as a relation.

Based on the distribution of elements, in structural analysis we find either power-symmetry between equally strong parties or power-asymmetry between a stronger and a weaker party. All elements from which the respective parties can draw power constitute structure. They maybe of material nature, i.e. hard power, (such as weapons) or of social nature, i.e. soft power, (such as norms, contracts or precedents).

These instrumental elements of power, are either defined as parties’ relative position (resources position) or as their relative ability to make their options prevail.

Structural analysis is easy to criticise, because it predicts, that the strongest will allways win. This, however, does not always hold true.

Strategic Analysis
According to structural analysis, negotiations can therefore be described with matrices, such as the Prisoner's Dilemma, a concept taken from Game Theory. Another common game is the Chicken Dilemma.

Strategic analysis starts with the assumption that both parties have a veto. Thus, in essence, negotiating parties can cooperate (C) or defect (D). Structural analysis then evaluates possible outcomes of negotiations (C,C; C,D; D,D; D,C), by assigning values to each of the possible outcomes. Oftentimes, co-operation of both sides yields the best outcome. The basic problem however is, that the parties can never be sure that the other is going to cooperate, mainly because of two reasons: first, decisions are made at the same time or, second, concessions of one side might not be returned. Therefore the parties have contradicting incentives to cooperate or defect. If one party cooperates or makes a concession and the other does not, the defecting party might relatively gain more.

Trust may be built only in repetitive games through the emergence of reliable patterns of behaviour such as tit-for-tat.

Process Analysis
Process analysis is the theory closest to haggling. Parties start from two points and converge through a series of concessions. As in strategic analysis, both sides have a veto (e.g. sell, not sell; pay, not pay). Process analysis also features structural assumptions, because one side maybe weaker or stronger (e.g. more eager to sell, not willing to pay a certain price). Process Analysis focuses on the study of the dynamics of processes. E.g. both Zeuthen and Cross tried to find a formula in order to predict the behaviour of the other party in finding a rate of concession, in order to predict the likely outcome.

The process of negotiation therefore is considered to unfold between fixed points: starting point of discord, end point of convergence. The so called security point, that is the result of optional withdrawal, is also taken into account.

Integrative Analysis
Integrative analysis divides the process into successive stages, rather than talking about fixed points. It extends analysis to pre-negotiations stages, in which parties make first contacts. The outcome is explained as the performance of the actors at different stages. Stages may include pre-negotiations, finding a formula of distribution, crest behaviour, settlement.