Getting to NO: The Strategic Use of Instrumental Negotiations

tricky businessman giving money to other businessman vector eps10
tricky businessman giving money to other businessman vector eps10

Getting to NO: The Strategic Use of Instrumental Negotiations

Krishnan S. Anand Pnina
Feldmany
Maurice E.
Schweitzerz

Wharton University of Pennsylvania

A substantial literature has examined negotiation problems. Throughout this literature, scholars
have generally assumed that participants approach negotiations with the intent of reaching a deal
and that aside from the direct costs of engaging in negotiations, negotiation participants cannot be
signi…cantly harmed by the negotiation process. In this paper, we challenge these assumptions using
a rigorous, game-theoretic model. We de…ne situations in which negotiators use the negotiation
process to achieve goals other than reaching a potential agreement as instrumental negotiations. We
model the implications of this broader conceptualization of negotiations and consider the in‡uence
of outside options and asymmetric information. We demonstrate that the mere possibility of
negotiating instrumentally and/or of encountering an instrumental negotiator signi…cantly changes
the equilibrium outcomes and harms pro…ts. We describe social welfare as well as prescriptive
and policy implications of considering instrumental negotiations. We also analyze the impact of
information about players’ outside options on the negotiation outcomes. We demonstrate that
both the ownership-structure (‘who knows what’) and the precision of the information available to
players can have a signi…cant impact on outcomes.

Introduction

Negotiation scholars in both psychology and economics have assumed that individuals approach
negotiations with the goal of reaching an agreement. This assumption is often implicit in the
problem formulation, but many scholars have stated this assumption explicitly as well. For example,
Fisher, Ury and Patton (1991: xvii) de…ne negotiations as “back and forth communication designed
to reach an agreement.”Similarly, Rubin and Brown (1975: 2) de…ne negotiations as “two or more
parties [who] attempt to settle what each should give and take.”Carnevale and Lawler (1986: 636)
state that “Negotiation is a form of symbolic communication that involves two or more people
attempting to reach agreement on issues where there are perceived di¤erences of interest.” And
Rubinstein (1982: 97) de…nes negotiation as a situation in which “two individuals have before
them several possible contractual agreements. Both have interests in reaching agreement but their
interests are not entirely identical. What will be the agreed contract, assuming that both parties
behave rationally?”

Getting to NO The Strategic Use of Instrumental Negotiations

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