“To practice better for real negotiations, engage in real game theory strategies. It’ll help your practice become the reality you seek.” -Greg Williams, The Master Negotiator & Body Language Expert (click to Tweet)
“How To Use Game Theory To Win More Negotiations”
People don’t realize they’re always negotiating.
Before engaging in high-stakes negotiations, negotiators delve into game theory to enhance their probability of a favorable outcome. They do so to simulate situations they might encounter in a real negotiation. It’s like practicing before the event. But how they practice determines the degree of success they’ll have in the talks. And that’s based on the game theory activities in which one engages. That’s why it’s essential to understand how to use game theory correctly if you want to win more negotiations. If not done correctly, you could be reinforcing bad negotiation habits.
Game Theory Premise
As it relates to negotiations, game theory is a simulation of expected interaction situations that replicate negotiation activities that’ll occur between negotiators. Initially, game theory practitioners created it to address problems in which the only way for one party to win was if the other loses. Thus, it sought insights that would deliver best-case scenarios to such situations. Accordingly, the better participants can replicate ‘real life’ conditions in a negotiation, the greater the benefit they’ll derive from this practice. Therefore, negotiators should use game theory to highlight the most favorable outcome possible by making strategic decisions at strategic points in the negotiation.
Game Theory And Artificial Intelligence (AI)
Game theory can help a negotiator improve her negotiation efforts. And artificial intelligence can play a significant role in that process. For example, if she’s trying to negotiate a contract, she needs to think about all the different ways that she can get the best deal. AI could have a database of past negotiation decisions made in specific situations. When she engages in game theory using AI, it could respond based on the negotiation parameters.
There’s an additional benefit to using AI in game theory. If AI helps negotiators make better decisions, it will also give its users more tools to negotiate better. Negotiators already use some form of AI in various ways. Most aren’t aware they do so. But with that recognition can come hidden value. Because it’s only recently that AI has become a tool that negotiators employ to improve and make more informed negotiation decisions. Therefore, those that use it in future negotiations will recognize an advantage that they’d not realized.
Game Theory Segmentation
There are multiple phases to a negotiation. The way a negotiator progresses from one step to the next impacts what’ll occur in that phase. Thus, a negotiator must be aware of what’s happening in each stage of a negotiation.
In game theory, a negotiator should be mindful of the phases they’ll encounter per the impact their actions will have on the following steps, too. Their efforts should become closely aligned with the estimated activities that’ll occur in the actual negotiation for which they’re practicing. To enhance the process, they should also consider unexpected ‘what if’ situations. The following are aspects to ponder.
At the beginning of a game theory session, a negotiator should consider where her opening may lead. How might she position herself and proposal such that it places her in the most prominent position should be top of mind. And that thought should be based on the negotiator type she’ll engage in the ‘real negotiation.’ That means she should base her actions on the negotiator type’s characteristics she’ll encounter. This engagement phase is essential because it sets up the simulation flow for the rest of the simulation process.
During the mid-level of the negotiation game theory, some negotiation practitioners suggest that a negotiator attempt to infuse their activities with unexpected actions. That’s in addition to what they’d planned to do. The purpose of this performance is to gain additional insight into potential actions that might occur and the response the opposing negotiator might make.
One notion in game theory is known as the endgame. The endgame’s purpose is to address actions leading to that point while observing participants’ strategies in reaching it. Sophisticated game theory systems driven by artificial intelligence can reassemble decisions before the endgame point enhances the negotiation process. In that environment, game theory is enhanced by continuously enriching its negotiation range of skills.
Negotiation Game Theory Practice
In practice negotiation sessions, a negotiator must consider the type of individual she’ll be engaging. Will it be an “I win, you lose” negotiator, one that’s more amenable to going along to get along, or one in the middle. The better the opposing negotiator’s duplication of demeanor, actions, offers, and counteroffers, the more significant will be her return on the practice sessions she has.
The arching point about negotiation game theory is, whether it’s computer-based or person-to-person role-playing – a negotiator must seek the feedback delivered to her actions to distill the best-case scenario for the negotiation. Doing so will allow her to uncover possible hidden strategies that might not have availed themselves had she not engaged in game theory practice.
Game theory in negotiations is a tool that savvy negotiators have employed for some time. They’ve done so because they know the value that lies within the simulation of game theory. By augmenting game theory with AI, a negotiator increases the probability of enhancing her efforts, along with receiving a greater return on them. And everything will be right with the world.
Remember, you’re always negotiating!
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