People in Business and Society - Simplified Summary
Lecture notes, chapter summaries
Game theory; identifying determinants of human decisions in strategic situations using mathematical
models to describe them.
Game theory extends rationality rather than abandoning it.
Nash equilibria; no players want to deviate to another strategy given the others play the equilibrium
strategy
● Rules;
○ 1 = Look forward reason backward
○ 2 = Use dominant strategy
○ 3 = Eliminate dominant strategies from considerations
○ 4 = Search all cells for a pair of mutual best responses (nash equilibrium)
○ 5 = choose at random from all available pure strategies
Choices off the path; options not chosen
Subgame perfect nash equilibrium; players’ choices in all decision nodes of the game tree
Equilibrium outcome; equilibrium path
Different levels of culture;
● National
● Organizational
● Occupational
● Up and coming markets
Different models of culture
● Relational; western - individualism
○ Dignity cultures
● Relational; asian/african - collectivism, empathy
○ Face cultures
○ Focus on harmony and avoidance of confrontational;
■ Hierarchy (deference to rank)
■ Humility (don't overreach your status)
■ Harmony (preserve)
○ Build a relationship should be priority
● Honor; middle eastern - loyalty, protectionism
○ Honor cultures
, ○ Focus on moral integrity and protection
Theories about culture;
1. Schwartz; culture values
2. House; culture and leadership
3. Kluckhohn and Strodtbeck; values orientation
a. Time orientation
b. Relation to humanity/environment
c. Relation to people
d. Motive for behaving
e. Nature of human beings
4. Schein; culture is the sum of workable solutions for problems of external adaptation and internal
integration that a group/organization/country has found.
a. Artifacts (visible)
b. Values
c. Assumptions (invisible)
5. Hofstede; culture is the collective programming of the mind distinguishing the members of one
group/category of people from others.
a. Individualism vs collectivism (IDV)
b. Power distance index (PDI)
c. Masculinity vs femininity (MAS)
d. Uncertainty avoidance index (UAI)
e. Long vs short term orientation (LTO)
f. Indulgence vs restraint (IND)
Leadership cultures
● Top down; top management then communicated down
● Hierarchical
● Egalitarian; flat structure
● Consensual; encouragement of collective acceptance/agreement before action.
Different perspectives in strategic games;
● Individual preference; max payoffs
● Fairness concerns/intrinsic motivations
● Social norms/cultural differences
Sequential move games (game trees);
● Players are rational
● Common knowledge of game
● Everyone understands that everyone understands this
Issues for splitting the pie in a bargaining situation;
● Cost of waiting
○ If can't reach an agreement, anyone can get their BATNA
, ● Size of pie
○ Negotiation is how much value can be created above the sum of the BATNAs
● Threats/commitments
● Brinkmanship may happen
○ Signaling
○ Different ideas of success
○ Could escalate rather than fold
Brinkmanship; each party guesses the others cost of waiting. Only until they discover that the other is
truly stronger, they back down. To prove one's waiting costs, begin incurring the costs and then show you
can hold out longer, or to take a greater risk of incurring the costs. Here the negotiations end and the strike
begins.
Virtual strike; workers work as normal without interfering with two negotiating parties; to prove low cost
of waiting. Workers don't get paid so they may work harder as every sale will hurt the manufacturer.
Non credible communication;
1. Promise
2. Threat; never advantages to let others do this do you; they can make it worse if you don't
cooperate as it limits your available options.
● Cheap talk is a non-credible promise/threat
○ Has little costs
Credible communication;
1. Assurance
2. Warning
● Deterrence; when you want to stop others from doing something they would do
● Compellence; compel others to do something they wouldn't do
● Deterrent promise; preventing someone from taking action against your interest.
● Compellent promise; compel someone to take a favorable action.
● Threat (deterrence & compellence); response with action that hurts you (and me)
● Promise (deterrence & compellence); respond with action that rewards you (costly for me).
Credibility is based upon 3 principles;
1. Change payoff of the game
2. Turn a threat into warning
3. Promise into assurance
Done through two tactics;
● Write a contract to back up your resolve
● Establish and use a reputation
Commitment tools (opposite to cheap talk);
● A solution (a binding action) for implementing incredible promises and threats
● Forces an outcome and commitment
, Making incredible promises and threats credible (commitment tools); - how to undermine opponents
Change the payoffs of the game
● Contracts
● Reputation
○ Neutralize the others reputation by keeping it secret
Change the game by limiting your ability to back out of a commitment
● Cutting off communication
● Burning bridges behind you
○ Leave a certain escape route for your opponents to reduce their resolve to fight. Can be
more credible to build bridges.
● Leaving outcome beyond your control
● Moving in steps
○ Resist in small steps (salami tactics; defuse the threat one slice at a time)
Use others to help you maintain commitment
● Teamwork
● Mandated negotiation agents
○ Refuse to deal with the agent and demand to speak to the principal
NVC; the language of domination in our thinking - judgment of what others deserve
● For eight centuries
● Evaluations on the basis of how needs are served rather than who is right/wrong
● “To see humannes is to see the needs without enemy images clouding that.”
Rosenberg’s model;
1. Expressing your own needs
2. Sensing the needs of others
3. Checking to see if the needs are being received accurately
4. Providing empathy to hear the needs of others
5. Translating strategies into positive action and language
Express your own needs - D'ansembourg;
● Intellect; judgment, automated beliefs, binary thinking, language
● Feelings; emotions
● Needs; cant meet them if unknown
● Request; differentiate needs from request
Two negotiation strategies;
1. Positional bargaining (simple exchange of offers)
a. Distributive negotiation
b. Slicing the pie
c. Win - lose
i. Issues; ego identifies with positions, no concerns for interests > endanger
relationships
Lecture notes, chapter summaries
Game theory; identifying determinants of human decisions in strategic situations using mathematical
models to describe them.
Game theory extends rationality rather than abandoning it.
Nash equilibria; no players want to deviate to another strategy given the others play the equilibrium
strategy
● Rules;
○ 1 = Look forward reason backward
○ 2 = Use dominant strategy
○ 3 = Eliminate dominant strategies from considerations
○ 4 = Search all cells for a pair of mutual best responses (nash equilibrium)
○ 5 = choose at random from all available pure strategies
Choices off the path; options not chosen
Subgame perfect nash equilibrium; players’ choices in all decision nodes of the game tree
Equilibrium outcome; equilibrium path
Different levels of culture;
● National
● Organizational
● Occupational
● Up and coming markets
Different models of culture
● Relational; western - individualism
○ Dignity cultures
● Relational; asian/african - collectivism, empathy
○ Face cultures
○ Focus on harmony and avoidance of confrontational;
■ Hierarchy (deference to rank)
■ Humility (don't overreach your status)
■ Harmony (preserve)
○ Build a relationship should be priority
● Honor; middle eastern - loyalty, protectionism
○ Honor cultures
, ○ Focus on moral integrity and protection
Theories about culture;
1. Schwartz; culture values
2. House; culture and leadership
3. Kluckhohn and Strodtbeck; values orientation
a. Time orientation
b. Relation to humanity/environment
c. Relation to people
d. Motive for behaving
e. Nature of human beings
4. Schein; culture is the sum of workable solutions for problems of external adaptation and internal
integration that a group/organization/country has found.
a. Artifacts (visible)
b. Values
c. Assumptions (invisible)
5. Hofstede; culture is the collective programming of the mind distinguishing the members of one
group/category of people from others.
a. Individualism vs collectivism (IDV)
b. Power distance index (PDI)
c. Masculinity vs femininity (MAS)
d. Uncertainty avoidance index (UAI)
e. Long vs short term orientation (LTO)
f. Indulgence vs restraint (IND)
Leadership cultures
● Top down; top management then communicated down
● Hierarchical
● Egalitarian; flat structure
● Consensual; encouragement of collective acceptance/agreement before action.
Different perspectives in strategic games;
● Individual preference; max payoffs
● Fairness concerns/intrinsic motivations
● Social norms/cultural differences
Sequential move games (game trees);
● Players are rational
● Common knowledge of game
● Everyone understands that everyone understands this
Issues for splitting the pie in a bargaining situation;
● Cost of waiting
○ If can't reach an agreement, anyone can get their BATNA
, ● Size of pie
○ Negotiation is how much value can be created above the sum of the BATNAs
● Threats/commitments
● Brinkmanship may happen
○ Signaling
○ Different ideas of success
○ Could escalate rather than fold
Brinkmanship; each party guesses the others cost of waiting. Only until they discover that the other is
truly stronger, they back down. To prove one's waiting costs, begin incurring the costs and then show you
can hold out longer, or to take a greater risk of incurring the costs. Here the negotiations end and the strike
begins.
Virtual strike; workers work as normal without interfering with two negotiating parties; to prove low cost
of waiting. Workers don't get paid so they may work harder as every sale will hurt the manufacturer.
Non credible communication;
1. Promise
2. Threat; never advantages to let others do this do you; they can make it worse if you don't
cooperate as it limits your available options.
● Cheap talk is a non-credible promise/threat
○ Has little costs
Credible communication;
1. Assurance
2. Warning
● Deterrence; when you want to stop others from doing something they would do
● Compellence; compel others to do something they wouldn't do
● Deterrent promise; preventing someone from taking action against your interest.
● Compellent promise; compel someone to take a favorable action.
● Threat (deterrence & compellence); response with action that hurts you (and me)
● Promise (deterrence & compellence); respond with action that rewards you (costly for me).
Credibility is based upon 3 principles;
1. Change payoff of the game
2. Turn a threat into warning
3. Promise into assurance
Done through two tactics;
● Write a contract to back up your resolve
● Establish and use a reputation
Commitment tools (opposite to cheap talk);
● A solution (a binding action) for implementing incredible promises and threats
● Forces an outcome and commitment
, Making incredible promises and threats credible (commitment tools); - how to undermine opponents
Change the payoffs of the game
● Contracts
● Reputation
○ Neutralize the others reputation by keeping it secret
Change the game by limiting your ability to back out of a commitment
● Cutting off communication
● Burning bridges behind you
○ Leave a certain escape route for your opponents to reduce their resolve to fight. Can be
more credible to build bridges.
● Leaving outcome beyond your control
● Moving in steps
○ Resist in small steps (salami tactics; defuse the threat one slice at a time)
Use others to help you maintain commitment
● Teamwork
● Mandated negotiation agents
○ Refuse to deal with the agent and demand to speak to the principal
NVC; the language of domination in our thinking - judgment of what others deserve
● For eight centuries
● Evaluations on the basis of how needs are served rather than who is right/wrong
● “To see humannes is to see the needs without enemy images clouding that.”
Rosenberg’s model;
1. Expressing your own needs
2. Sensing the needs of others
3. Checking to see if the needs are being received accurately
4. Providing empathy to hear the needs of others
5. Translating strategies into positive action and language
Express your own needs - D'ansembourg;
● Intellect; judgment, automated beliefs, binary thinking, language
● Feelings; emotions
● Needs; cant meet them if unknown
● Request; differentiate needs from request
Two negotiation strategies;
1. Positional bargaining (simple exchange of offers)
a. Distributive negotiation
b. Slicing the pie
c. Win - lose
i. Issues; ego identifies with positions, no concerns for interests > endanger
relationships
