Fundamentals of Game Theory and Negotiation

Gregg Walker, Dept. of Speech Communication, Oregon State University

An Overview
Game theory has been one of the dominant research paradigms for studying conflict, bargaining, and negotiation for almost fifty years.

The Prisoner's Dilemma game has been a primary method for studying bargaining and negotiation from a game theory perspective.

Tit for Tat has emerged as one of the stronger game theory strategies (Axelrod, 1984, The Evolution of Cooperation).

Game Theory Assumptions

1.  Players or parties are fully rational.

2.  The number of players is fixed and known to all parties.

3.  Each party recognizes a set of available options and develops tangible preferences among those options.  Preferences remain constant throughout the conflict/negotiation interaction.

4.  Each party knows or can estimate well the options and preferences of the other parties.

5.  Communication is limited, highly controlled, or not relevant to the conflict/negotiation interaction.

6.  A decision must be possible that is maximally efficient, i.e., intersects with the solution set at a point that maximizes each party's own interests (Pareto optimal).