Syllabus For:

BARGAINING GAMES

Northwestern University
Kellogg School of Management

Monday and Thursdays, Winter 2004

Course Description:

This course is designed to help you become a professional negotiator, professional in the sense that you should be able to conscientiously and effectively choose among a limited set of potential strategies.

The notion of being professional is very important. This is a professional school; this course should provide you with the skills and intuition necessary to negotiate in a variety of contexts in a very professional way; and you are probably in a professional position right now. I'd like to accentuate that in this class. To do this, we need to teach you about negotiation and about how to negotiate. Both parts will be emphasized. Thus, we will play strategic games most classes, but we will also read and discuss theory and research on bargaining. So, if you enjoy games, you will enjoy the classes. At the same time, if you enjoy doing student stuff, you will like the reading and other assignments.

To emphasize the professional nature of the class, I would like all of you to assume that your firm has sent you for additional training this winter, and part of your training is this course. Your company has hired me to direct your negotiations training. Your task is to learn as much as you can about bargaining so that you will be even better equipped to handle all of your normal, critical duties.

Most of our readings will come from my text, The Dynamics of Bargaining Games. Prentice Hall. This book has gone out of print and the copyright has reverted to me. This means that I can include all of the chapters that we will be reading in the case packet, without a need for you to make royalty payments.

Each week, YOU SHOULD NOT DO THE READINGS IN THE SYLLABUS PRIOR TO CLASS. Instead, read them after we have debriefed the class exercise. This will fit the format of the course better. In essence, each week we will (1) experience a negotiation, (2) discuss it and analyze it in class, and then finally (3) read about it for greater understanding. All readings, then, should be completed after the class exercise, prior to the next week's activities.

Grades and Journals

I hope that your focus in this class will be on learning rather than on the grade you will receive. If you learn a lot, you can pretty much count on your grade coming along well, too. And now that I've tried to de-emphasize grades, let me dwell on them for awhile!

Your most important course activity outside of class meetings will be your journal--a recording of your thoughts about the classes and readings and the negotiations you have everyday. The journal gives you a chance to think and reflect on bargaining, which will help improve your understanding about your negotiations, your actions, and yourself. Your journal is both for you and for me. You will turn in six journals. My assistants and I will read them and give you feedback on many of them, especially the first few. Early feedback will concentrate on how to improve your journal if it needs improvement. A consistent string of excellents and outstandings on your journals will certainly merit a high grade; lots of fairs and poors will mean that you won't get a wonderful grade and that your job is probably in jeopardy. Not doing the journals, or doing them without thought or effort, will put you in line for an even lower grade. They will account for 45% of your grade. (Because there are no exams, I expect excellent work on both the journals and your collective bargaining reports, described below).

You should think of your journals as a cross between a business report and a personal diary. They should be complete enough so that you can return to them in the future and remember the important points in a negotiation. They should also provide me with an indication of how analytically you are thinking. Each week, they should include analytical comments on our previous interaction (based on the exercise itself, the class discussion, and/or the readings) and, MORE IMPORTANTLY, a discussion of an outside-class negotiation that's related to this material. Use a short, nickname description of the previous class's exercise as your title, present your analytical comments (i.e., ideas that strike at the heart of the exercise and what it means), indicating why they are important, and then describe and analyze one of your past bargaining interactions. Each journal should be one to two pages total, typed in 12 point Times Roman font and spaced at 1.5 lines. Your journals should be short and to-the-point.

To help you analyze strategically, you might ask yourself the following questions:

" Why did my strategies and tactics work? Why did they fail?
" How do I feel about my strategies and tactics? Would I change them if I could do it all over again? Why?
" How could I have done better?
" Who controlled the negotiation? How?
" Did I read the other party or parties accurately? Were they and I happy with the outcome?
" What were the critical factors here, for me and for the other person?
" As I apply this to other interpersonal interactions, what subtleties are most important?

For the collective bargaining exercise, your negotiating team will submit, in detail, (1) a write-up of your strategies prior to negotiating, (2) an 'update' report during the middle of the negotiation process, and (3) a report when the negotiations are over. The first two papers will focus on your strategic analysis of the situation and your tactical plans. The final report will be a post-mortem analysis, including reflections on why it went right or wrong, how it could have gone better, etc. These reports will account for 45% of your final grade.

One other central element in the course may be the production of new information about bargaining. What this really means is that some of our classroom exercises may double as new research studies. This also fits the philosophy of the course: Almost all of the exercises we will experience have been studied in previous research projects with previous classes, like yours. As a result, students from those classes have contributed to your learning experience. In the same way, by participating in new research projects, you will be contributing to the experiences of future students. In every case, these new exercises will also be designed to maximize both learning value and research potential. We've had a lot of practice satisfying both these criteria in the past, so don't worry about experiencing new exercises. They help keep the course fresh.

Finally, an essential contribution I ask each of you to make to this course is to be professional in your actions in the class and your interactions with me and your classmates. In particular, treat our exercises and games seriously. If you are at all frivolous about what we do in the class, you will learn less and provide less opportunity for others to learn. This does not mean you have to be stern and not enjoy the bargaining we do in class. Instead, it means that you should take your roles seriously, and take the exercises seriously. You should try to do well and you should never demean either the exercises or the people you are bargaining with after the negotiations are over. You should think about your strategies and work hard to make sure they are appropriate and effective. You should consider the consequences of your actions within the framework of the exercise and what they might be in other situations. Thus, anyone who justifies their tactics by saying "it was just a game" will be asked to leave the room for the rest of that class. You should do as well as you can within the constraints of the situation--this is the best you can do in any situation, whether it is one of the games we play in class or one of the many games you play in other arenas.

One final thing about our classroom sessions: in our debriefs, we will discuss what happened and why it happened. We'll discuss strategies that worked and strategies that didn't. If you should use a strategy that didn't work, I will ask you about it and expect you to be open and willing to discuss it in class. These exercises will probably be new to everyone. Thus, people will make mistakes and use inappropriate strategies. By delving into the thinking that led to a particular strategy, we can correct the thinking and not let it interfere with future negotiations. So I'm really not picking on you when I ask you about your strategies. To learn as much as we can in this class, we need to discuss not just what happened but why. These discussions will show how important post mortems are to future negotiation strategies. They also provide us with an opportunity to not only learn a lot about bargaining but also about ourselves.

Other Expectations

As this is a professional school, I expect that you will all act professionally in this class. Thus, I expect that you will attend each class, on time, and notify me in advance if you must miss a class. If you think of our meetings as work meetings, i.e., as if you were working full time and our meetings are an important part of your job, you'll have an idea of what I expect. Because our class sessions are experiential, and because we often must assign you to bargaining pairs/teams in advance, even an excused absence can cause a problem. This is all the more reason for alerting me in advance. Thus, please email me in advance if you must miss a class. (An email will allow me to print a written record of who will not be attending class and plan accordingly.)

Certainly unusual situations can arise in which it will be impossible to forewarn me that you will miss a class. These situations might, for instance, result from a car crash or another unforeseen event. These instances, however, should be quite rare.

Because repeated absences will diminish the impact of the course, they will result in grade reductions. Thus, should you accumulate three absences (all with prior notification), your grade will drop by a full letter. The same is true for every unexcused absence. Absences of four or more classes will lead to additional grade reductions.

The Honor Code

The Kellogg Honor Code is applicable in this class. The complete text of the Honor Code is available on the Honor Code website:
http://www.kellogg.nwu.edu/student/gma/honor/index.htm

The Honor Code is enforced at Kellogg and violations are subject to disciplinary sanctions. Honor Code issues seldom arise because of Kellogg's culture. I truly hope that these kinds of issues will not arise in this class.

The discussion in this syllabus of the Honor Code may not cover all applications of the Honor Code. If you believe something is unclear or has been omitted, please let me know. Here are some of the highlights of the honor code as they relate to this class:

" Written assignments must be your original work. You may not use materials containing solutions or partial solutions to the assignment (including solutions prepared by current and former Kellogg students). If your analysis contains information from outside sources, then you must properly cite the sources.

" The Honor Code and the rules in this syllabus also apply for any exchange or visiting student. I expect you to have signed the Honor Code before the first class. If you haven't, please do so immediately by contacting the Student Affairs Office.

Last but not least: Should you want to meet with me outside of class, please see me before or after class or email me, and we can make an appointment that's convenient for both of us.

Bargaining Games
Syllabus
Professor J. Keith Murnighan
Winter 2004

Reminder: Unlike the other readings, the Walton and McKersie readings should be completed before you begin the collective bargaining exercise. In fact, it's a good idea to start reading them right after I hand them out.

Pre-Readings: Preface and Chapter 1

Jan 5 Introduction and Overview of the Course
Exercise: DILEMMAS

Jan 8 Debrief/Discussion
Readings for Jan 12: Chapters 2 and 10
Assignment: First Journal Due Next Class

Jan 12 Markets, Bargaining Structures, and Information I
Exercises: A QUIZ, A RACE, and A GAME

Jan 15 Debrief/Discussion
Readings for Jan 19: Chapters 3 and 4
Assignment: Second Journal Due Next Class

Jan 19 Competitive Negotiations
Exercises: TAKE-IT-OR-LEAVE-IT

Jan 22 Debrief/Discussion
Rdgs. for Jan 26: Chs. 11 + 12;
Pillutla & Murnighan,'Fairness vs. Self-Interest'
Assignment: Third Journal Due Next Class

Jan 26 The Use and Misuse of Information
Exercise: THE INFORMATION GAME

Jan 29 Debrief/Discussion
Readings for Feb 2: Chapters 8, 9
Assignment: Fourth Journal Due Next Class

Feb 2 Coalition Formation
Exercise: THE 4-3-2 GAME
Begin reading Walton & McKersie, Chapters 3, 5, 7, & 9

Feb 5 Debrief/Discussion
Reading for Feb 9: Chapters 13
Assignment: Fifth Journal Due Next Class

Feb 9 Power
Exercise: THE EXECUTIVE DECISION MAKING GAME
Start working on your Collective Bargaining Strategies

Feb 12 Debrief/Discussion
Reading for Feb 16: Chapters 15 and 6

Feb 16 Intro to Collection Bargaining Exercise
Finish reading Walton & McKersie, Chapters 3, 5, 7, & 9

Feb 19 Exercise: COORDINATION GAMES + Debrief/Discussion
Reading for Feb 23: Chapter 5
Assignment: Collective Bargaining Group Strategy Report #1 Due Feb 23rd

Feb 23 COLLECTIVE BARGAINING EXERCISE, PART I
NOTE: Class begins at 8 a.m.
Assignment: Updated Group Strategy Report Due Next Week, Mar 1st

Feb 26 No class meeting

Mar 1 COLLECTIVE BARGAINING EXERCISE, PART II
NOTE: Class begins at 8 a.m.
Assignment: Final Group Strategy Report Due Next Week, Mar 8th

Mar 4 No class meeting

Mar 8 Collective Bargaining Debrief
Reading: Chapter 14

Mar 11 The Ethics of Negotiation; Course Wrap-up
Readings: Chapters 16, 17, and 18

Where We've Been
Winter Quarter, 2004
Bargaining Games
Professor J. Keith Murnighan

The Gas Station Game
The Envelopes and Money Game
The Silent Bargaining Quiz
Race to Twenty
The Number Market
The Ultimatum Game
The Information Game
The Game of 4-3-2 and its variations
The Executive Decision Making Game
Final Offer
The Ridgecrest case