Leftovers of last class

Another Test of Frame Effect 1

Background Fatal Asian Disease broke out. 600 peoples are infected. Your are responsible to chose vaccine.

Test 1: survival frame Vaccine A: can save 200 people Vaccine B: has 1/3 chance to save all (600), but

2/3 chance to save no one What is your choice of vaccine

Test 2: mortality frame Vaccine A: can cause 400 people to die Vaccine B: has a 1/3 chance to save no one and a

2/3 chance that 600 people will die

Another Test of Frame Effect 2

Background Asked physician which do they take for teat lung

cancer Test 1

Surgery has a 90% immediate survival rate, and a 34% 5-year survival rate

All patients survived from radiation therapy and 22% remained alive after 5 year (18%)

Test 2 Surgery: 10% of patients die during surgery and

66% die by the end of 5 year Radiation: no one die during the therapy, but 78%

die within 5 years (49%)

Application of frame effect

Definition of frame Frame is the manner in which the choice problem is presented

Real story of Teddy Roosevelt’s Presidential campaign TR made 3 million copy of pamphlets including his photo and speeches One of staff found that Mettett Studio, Chicago had a copyright of TR photo

in pamphlet If Mettett Studio demands a copyright fee, TR should pay around $3 millio

n, which could bankrupt campaign camp If ignore, TR committed a crime Agreement that Negotiation to pay copyright fee is best choice Gorge Perkins was responsible for it.

Outcome: He won $250 from Mettett Studido without pay nothing

What did it happen? How did Gorge Perkins solve TR photo dilemma.

Implication of Frame Effect

Frame Effect People tend to take risk aversive choice between gains

= risk aversive choice in gain frame= safe choice in domain of gain

People tend to take risk seeking choice (gamble) between losses= risky choice in gain frame= gamble in domain of loss

Safe choice in gain frame, risky choice in loss frame, no maximization

How to get to know in which frame is each party located His situation is worsening, he is in gain frame Time against is improving, he is in loss frame

How to get Cooperation in PD Game

TFT (Tit-for-Tat) Precondition: endless

repeated PD game In first game, chose

Cooperation. From the second game, chose the choice that the game partner took in previous game

In computer simulation, the participants to take TFT get the highest point.

Implication: Reciprocity

Frame effect

PD Game

C D

C 3, 3 1, 4

D 4, 1 2, 2

Frame effect and Game Theory

Prisoner’s Game Cooperation is Risky

choice Defection is Safe

choice∵ Cooperation takes risky

of be advantaged by others; risky of take worse outcome

Chicken Game Cooperation is Safe

choice Defection is Risky

choice∵ Defection takes risky of

huge loss

PD Game

C D

C -1, 3 -7, 4

D 1, 1 -2, 2

Chicken Game

C D

C 0, 1 -2, 4

D 4, -1 -9, -8

Implications and summary

Implication of theories Get the information in which frame each party is

located Get preference order of each party Get game matrix Change probability, benefit, cost in order to

change preference order and choice

How to be a good negotiator? Prepare BATNA

the priority bidder Make the time on your side

Quiz

Set the best negotiating time When is the best time to buy a vegetable and fish

in grocery with good price? When is the best time to buy a air-conditioner with

good price? When is the best time to buy a car with good

price? When is the best time to deal with democratic

government? When is the best time to buy a new company? When is the good time for labor union of airlines to

deal with company?

Nature of Negotiation

3 Way to solve conflicts

Power-based solution Strike, military pressure Who should yield?

Right-based solution Lawsuit Who is right?

Interest-based solution Reconciling conflicting interests

Power Right interests

Cost of disputes High Low

Satisfaction with outcomes Low High

Effect on relationship worse bad good

recurrence low high

4 criteria to judge good negotiation

Agreement Efficiency of outcome

Optimization When there is no other outcome without

sacrificing one or all of participants Stability of outcome

When participant has no intention to break agreement

Distribution of benefits Is it fair? Fairness does not mean equal distribution Raul’s rule of justice

Phases of Negotiation 1

1. Preparation phase1. Study the nature of crisis

1. With dual interest model, conflict diagnostic model2. Clarify the interests group and organization

concerned with3. Who are pros and cons?4. Find BATNA (Best Alternative to Negotiated

Agreement)5. On Which side is the time?6. Is this an Endgame for all or not?

2. Analysis of Agenda1. Find linked issue: forward link and backward link2. Make a “Task Forces”3. Collect “Reliable” Data4. Evaluation of data

EEZ Negotiation between Korea and Japan

Background From 10 years ago, Japanese government expect fishing in the

neighboring waters to be difficult because of over-catching. They released young fish into offshore to save its fishery, which

needs more than hundreds million dollars a year. Most of them are also caught in Korean fisherman. Japan asked Korea to limits amount of product in overlapped EEZ

(200 nautical miles from coast) in 1996. Agenda

How to set a reasonable amount of fishing to two countries. Result

Negotiation ended in very a short time. After agreement, it is found that Japan did a very excellent deal. Korean negotiation teams had a serious problem in data

collection. Japan team visit a fishing village and survey to real amount of

fishing; Korean team collect data in armchair from tax office. Bitter experience for Korea

Phases of Negotiation 2

4. Set the goal of negotiation Expect your rival’s goal and bargaining range with

“reliable data” Acceptable rage: Maximum Goal, Bottom line

5. Creative interpretation to maximize “Common Interests”

6. Communicate with partner for “Place”, “Time”, “Fund”, “Type” Open or closed?

3. Bargaining Phase4. Ratification Phase

The Dual Concerns Model

Conflict Diagnostic Model

Fairness

High concern about “Relative Gain” Who get more in final outcome ?

4 ways of distribution1. Equal distribution2. Asymmetric distribution according to endowment

Who invested more get more

3. Asymmetric distribution in favor of the stronger4. Asymmetric distribution in favor of the weaker

Which one is the most appropriate? It is main topic of bargaining phrase

Quiz: How to divide home-made pizza

Background Three children love to eat pizza Elder son(14 year old), second (11 year old), last

daughter (8 year old) used to fight each other to have more pizza and better part they like.

It is home-made one, which ingredients used to distribute abnormally.

Parents would not intervene children’s conflict.

What is the most fair way to distribute pizza?

Endgame

In chess game, the endgame refers to the stage of the game when there are few pieces left on the board.

The stage that participants in negotiation consider to take a good position to get something satisfying or maximizing its interests in bargaining.

Participants does not expect to take better position with passing time.

In endgame, participant(s) have a sincere attitude to the negotiation.

If not, negotiation will be floating and hard to find any agreement. Ex: North Korea and Iran.

How to make Endgame?

Increase Benefits to cooperation Side payment

Reduce cost to cooperation Audience cost

Increase cost of defection (cost of alternative) (reliable) threats

Increase probability to win in cooperation (decrease chance to lose)

How to make Endgame?

For the tiger to love farmer’s daughter. How to change the game matrix that he could not accept?

Increase Benefits to cooperation Side payment Hunt a deer and bring it to farmer everyday Can protect farmer’s family from outsides Show off his is useful to the farmer’s

Reduce cost to cooperation Audience cost Use mouth piece and gloves

Increase cost of defection (cost of alternative) (reliable) threats Threat to hurt one of family everyday Threat to hurt its neighbors Make farmer’s neighbors to want a marriage

Change the perception of farmer to think his tooth and claw are not dangerous weapons, but useful tool for life.

New Game Tree of Loving Tiger

New Game Matrix of Loving Tiger