Negotiation Games: Application of Game Theory in Negotiations

The omnipresence of negotiations is, without a doubt, ubiquitous. From daily life transactions with auto-rickshaw drivers or grocers to international trades and wars, every individual engages with negotiations. Negotiations are interactions between different parties holding diametrically opposing stands along with certain intersecting interests, wherein they attempt to reconcile their conflicts and procure a feasible settlement. All negotiations are essential ‘games’ in as much, all parties or ‘players’ must make choices or ‘strategies’ to reach a desirable agreement or ‘outcome’. Since all negotiations can be simplified into game models- they can be dismantled and regulated by the ‘game theory’. In this article, the author attempts to explore how principles of game theory may be applied in negotiations and the advantages of such application. Specifically, the author tries to illuminate how parties may use game theory to anticipate the other party’s possible strategies and possible outcomes of negotiation and, in turn, enter the negotiation with strategical advantages.