An Analytical Process Model of Two-Party Negotiations

Abstract

There has been a call to investigate the negotiation process (Gale [Gale, D. 1986. Bargaining and competition part I: Characterization. Econometrica 54(4) 785–806.], Shubik [Shubik, M. 1982. Game Theory in the Social Sciences: Concepts and Solutions. M. I. T. Press, Boston, MA.]), as it is felt that this would yield important insights beyond those obtained by outcome-oriented theories (Roth [Roth, A. E. 1979. Axiomatic Models of Bargaining. Springer-Verlag.]). This paper proposes a new analytical process model that captures both behavioral and economic aspects related to two-party negotiations. The proposed model, inspired by Pruitt's (Pruitt, D. G. 1981. Negotiation Behavior. Academic Press, New York.) work, explicitly incorporates concepts which are both relevant and crucial, such as the negotiators' power, concession points, aspiration level, limit, and time pressure. Based on this process model, it is possible to predict (1) conditions under which agreements will not be reached despite the existence of a zone of agreement, (2) conditions under which agreements will be reached, and (3) the patterns of the negotiators' offers and counteroffers.