tl t ,I The Art and Science of Negotiation HOWARD RAIFFA The BelknapPress of Harvard University Press Cambridge, Massachusetts and London, England I I i i I I I Acknowledgments Ideas are incestuous. They commingle and refuse to sort thenr- selves out so that one can say, "These ideas are his or hers arrd those mine." I know, however, that many of the ideas in the chap- ters that follow are the ideas of others, and some of these others can be identified. To no one am I more indebted than to John Ham- mond. This book would not have been written if I had not chosen to teach a course in competitive decision making at the Harvard Busi- Copyright O f 982 by the President and Fellows of Harvard College All rights reserved ness School, a course that evolved over more than a decade. In the Printed in the United States of America mid-1960s I taught a doctoral seminar in individual, group, and irr- teractive decisions, and in the early seventies John Hammond irr- corporated some of the material from that seminar in a pioneering 'he "Competitive Art of Negotiating" is a registered trademark of Gerard I. Nierenberg. This M.B.A. course entitled Decision Nlaking." I later in- :,The Art and Science of Negotiation, is not connected with Mr. Nierenberg's herited that course from John and built on his materials. Although i or programs. my course evolved into one that was substantially different frorn John's, he had set the tone; and even when I departed from his 87 6543 work, I had a very comfortable launching pad. Occasionally, u'hen I fell flat, I picked up again from his supporting net. book is printed on acid-free paper, and its binding materials have been chosen Now Elon Kohlberg is teaching that course, and his versiorr will :rength and durability. certainly be different from mine. Some of his iderrs.too. have been incorporated into this book, without credits, bec:ruse I can't everr Library of CongressCataloging in Publication Data begin to sort out which ideas are his and which are mine. Raiffa, Howard, I92't- So it is with some of my former doctoral The art and scienceof nesotiation. students who worked with me at various times during the last five years. Some of me is in Bibliography: p. their dissertations, and a lot of what is in their dissertations can be Includes index. found here. I acknowledge the contributions of Kalyan Chatterjee, 1. Negotiation. 2. Diplomatic negotiationsin Zvi Livne, James Sebenius, Timothy Sullivan, and Jacob Ulvila. intemational disputes. I. Title. Jim Sebenius deserves special thanks. Not only did he teach me 8F637.N4R34 302.3 82-6L70 about the Law of the Sea, but he's a wonderfully supportive and ir.r- ISBN 0-674-04812-1 AACR2 cisive critic-and it's hard to be both. Vl /.,\C]K,\ O\\'L E DG M E NTS ACrrvOWr.E DcM ENTS/ vii I have also drawn liberally on ideas discussedduring seminars This book is an elaboration of the H. Rowan Gaither Lectures in *'ith members of the Harvard Negotiation Workshop. In that group I Systems Science, delivered November 1980 at the University of I interactedmost closely with RogerFisher, Bill Ury, Jim Sebenius, i California, Berkeley. These lectures are named in memory of one of Frank Sanders,Larry Susskind,James Healy, and David Lax. Roger i- the founders, and first chairman of the board, of the RAND Corpora- and Bill's book,Cetting to Yes,is full of important insights,and in tion. They were established by a gift from the System Develop- nry weaker moments I thought of such titles for my own as Before ment Corporation, formerly a division of the RAND Corporation, Gr:ttirtgto Yes or BegondYes. and are held under the aegisof the Schoolof BusinessAdministra- Sonreol'the materialin this book hasbeen used in variousexecu- tion and the Center for Researchin Management of the University tive prograrnsat Harvard'sBusiness School and Kennedy Schoolof of Califomia, Berkeley. The past lecturers were Charles J. Hitch, Government,and in variousindustrial executivetraining programs. Charles L. Schultze,Alice M. Rivlin, John W. Macy, Jr., Sir Geof- I havecollaborated with and observeda masterof this type of peda- frey Vickers, Erich Jantsch,and Herbert A. Simon. gogy, Paul Vatter, who in innumerable ways has influenced my choice and treatmentof subjects. I have drarl,ncopiously from Mark G. McDonough's caseson in- ternationalnegotiations, which were prepared partially under my superwision.These casesprovided rich backgroundmaterial from which I concocted several abstractions.His help was indispens- zrble. Whenever anvoneasks me whether I prefer A or B, I almost in- variably answer "Why not both?" When anyone asksme where I learnedsornething and I can't remember,I invariably answer"Tom Schelling," and I think I'm right 69.4 percent of the time. In the late 1970sI thought about writing a book on negotiation, brrt i kept postponingthe first steps.[f Wes Churchmanhad not in- r''itedme to give the 1980 Gaither Lectures at Berkeley on the topic of negotiationanalysis, I might still be thinking of thoseffrst steps. I' irurindebted to Wes and his colleaguesat Berkeley for focusingmy thoughts. Poornima Ram not only typed and retyped and retyped my evolv- ing manuscript, but her readings of the text helped me tremen- dously. Whenever she does not understandwhat I've written, I know that I'm in trouble. It's a pleasureto work with her. I deeply appreciate the superb quality of the editing of this book; Maria Kawecki's precision irnprint is on each paragraph.AII remaininggrammatical errors are hers,all errorsin the symbolsare the typesetter's,and my wife agreesto sharewith me responsibility for the rest. Contents Prologue I Part I: Overview I Some Organizing Questions ll 2 ResearchPerspectives 20 Part IIl Two Parties. One Issue 3 Elmtree House 35 4 Analytical Models and Empirical Results 44 ,5 Settling Out of Court 66 6 The Role of Time 78 1 Acquisitionsand Mergers 91 8 Third-Party Intervention 108 I Advice for Negotiators 119 Part III: Two Parties, Many Issues l0 AMPO versusCity 133 I1 Tradeoffs and Concessions f48 L2 The PanamaCanal Negotiations 166 l3 Risk Sharing and Insecure Contracts I87 X/CONTENTS L1 The Camp David Negotiations 205 .tD Mediation of Conflicts 2L8 t6 Arbitration of Disputes 235 . Prologue Part IV: Many Parties,Many Issues t7 Coalition Analysis 257 r8 The Law ofthe Sea 275 graduate in lo Fair Division 288 In the late 1940s I was a student mathematics at the University of Michigan, partially supportedby a contractenabling 20 Willingnessto Pay for a Public Good 300 me to do work in the theory of games.There was an amazing burst 2I EnvironmentalConflict Resolution 3f0 of researchactivity in this specialityat that tinre, especiallyat the 22 The Mariner SpaceProbes 318 RAND Corporation and at Princeton University, where in 1944 23 Voting 327 John von Neumann and Oskar Morgenstem wrote their classic tome, Theory of Cames and Economic Behaoior. Very rapidly the easierresearch topics were being appropriatedand a fresh crop of Ph.D. studentswere looking for new fertile ground to explore. I Part V; General Concems was in a cohort that was beginning to studv two-person gantes where the protagonistsdid not have strictly opposinginterests (the 24 Getting People to Communicate 337 so-callednon-zero-sum games). My thinking was very much in- 25 Ethical and Moral Issues 344 fluencedby a lecturegiven by William Haber,proi'essor of econom- Eprrogue JD/ ics at the Universityof Michigan,who talked aboutthe role of arbi- tration in labor disputes.The lecture set me to wondering: If two playersof a non-zero-sum,abstract game asked me to act as arbitra- joint Bibliography 361 tor and to determinea outcomefor their dispute,what would I do? And thus I began somehighly abstractmathematical resealch Index 369 into this problem-research in the genre of gametheory. I was in- terestedin mathematicalelegance, and the peerswhose opinions I valued were the mathematicalcommunity. I certrrir-rlywils not driven to do empirical work, to see how arbitrationactually f\rnc- tioned in the real world; nothing could have appealedto me less. Receiving my doctoratein 1951,I drifted back and forth between ii game theory and mathematicalstatistics for the next six years.After .i rl GarnesandDecisions, written with Duncan Luce, was published in 1957, I accepteda joint appointment at Harvard: I was to teach sta- tistics in the newly created Department of Statisticsand perhaps game theory in the Graduate School of BusinessAdministration. I '( :l Z / PRO[,OGUE PROLOGUE/ 1] "others"? clidn't know very much about business (a vast understatement) and without assurning excessive rationality on the part of the I began by studying ioads of case studies of real-world problems. My efforts were still marginal. Practically every case I looked at included an interactive, competi- In 1967 President Lyndon Johnson asked McGeorge Bundy, then wavs- tive decision component, but I was at a loss to know how to use my president of the Ford Foundation, to explore with the Soviets expertise as a game theorist. The theory of games focuses its atten- in which science could promote international cooperation. Perhaps - tion on problems where the protagonists in a dispute are super- :'"oi"t r i" tid e?-aTl;g ke e-pln gT w av fro rii' dffi s Co n t ro I an d " " "iini" rational, where the "rules of the game" are so well understood by space exploration-would be appropriate. They weren't sure the "players" that each can think about what the others are thinking whether the effort should be bilateral or multilateral, but multilat- about what he is thinking, ad inffnitum.