And now for something completely different . . .
Several years ago, I teamed up with Michael Hemment and HBS’s Baker Library to create Negotiate 1-2-3, a multi-media resource that zeros in on three important stages of negotiation: Openings, Critical Moments, and Closings. Its 30 modules run from 15-30 minutes each. Access to all that material is free.
One of our modules is about how ultimatums that spark moments where the outcome of negotiations can teeter between a deal and a deadlock. Behavioral psychologists have gleaned important insights into the dynamics of such situations by studying how subjects complete a short exercise called the Ultimatum Game. Next week I’ll review key findings, but first you have a chance now to do that exercise yourself on the Negotiate 1-2-3 platform.
Here’s the scenario. There are two parties, the Allocator and the Recipient. They are complete strangers. Neither party knows their counterpart’s name, nor will they ever deal with one another again.
Their task is to divide $100. Moreover, their capacity to communicate is severely limited. The Allocator can only state a specific take-it-or-leave-it offer defining how much each of them will get. Depending on who’s in the Allocator role, one person might lay out a fifty-fifty split, while another might claim $99 for himself or herself, leaving $1 for the other person.
The Recipient cannot make a counterproposal, rather can only respond by saying either Accept or Refuse. If he or she says Accept, the $100 is divided in accordance with the Allocator’s formula. But if the reply is Refuse, neither party gets anything.
Mindful of those rules, consider the following questions:
1. If you were assigned the Allocator role, how would you divide the $100 between you and the Recipient?
2. If instead you were a Recipient, what is the minimum amount you would accept? Remember that if you refuse what the Allocator grants you, both of you get nothing.
3. Who has greater power in this game, the Allocator or the Recipient?
Maybe this game sounds simple, but it’s not. You’ll understand why when we dig into the strategic issues next week and see how they apply to many day-to-day negotiations.
If you have three minutes right now, I encourage you test your choices above by playing a quick computer-based version of this game in the Ultimatums module of Negotiate 1-2-3.
You’ll play the game five times, each one with a different party. Plus, you’ll have the chance to be both an Allocator and a Recipient. (And you can do more than once, if you want to try out different approaches.)
Here’s the link: http://negotiate123.com/ultimatums.php .
You can skip the instructions, as they’re summarized above. Just scroll down to these buttons to activate the game.
Have fun!
Housekeeping
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Mike