Module 7 / Styles of Negotiation

suspicions. Many businesses, anxious to hold onto their customers, go to great

lengths to promote the sense of trust that their customers can place in them. They
want a long-term relationship with their customers and, with ‘no quibble’ guarantees
and instant refunds in full, they market their trustworthiness in order to persuade
their customers to trust them. Some major used-car companies spend a great deal
on marketing an image that counters the popular one of their being spivs and
sharks. Once earned, a reputation for commercial brigandage is a lot more difficult
to shake off than one for commercial decency.

7.3 Negotiator’s Dilemma

There is a well-known game in social science (though I have seen it also applied to
genetics and moral philosophy). The original game was developed by Professors
Merril Flood and Melvin Dresher in January, 1950 at the RAND Corporation in
Santa Monica, California, and it was formulated into a story of two prisoners a few
months later by Professor Albert Tucker, and is now widely known as Prisoner’s
Dilemma. In essence, we have been discussing versions of Prisoner’s Dilemma in
the exploits of Dan and Rodney with the stranger. In its original 1950s format, the
dilemma centred on two prisoners who had been arrested on suspicion of having
committed a major crime, though the exact details of the prisoner’s story have
changed many times over the years. The one I use goes as follows.
The investigating authority (the District Attorney) could not prove that the pris-
oners had committed the crime but he was willing to engage in a device that would
have a good chance of securing at least one conviction, and perhaps two (the ethics
of ‘due legal process’ do not enter the discussion). He separated the prisoners so
that they could not communicate with each other and offered each of them the
same deal:
‘You have two choices. Either you confess or you do not confess to the
crime. If you confess to the crime and your partner also confesses, you will
each receive ten years in jail (it was a very serious crime). If you confess but
your partner does not, you will be set free, after giving evidence that convicts
your partner, and he will get 20 years in jail. If you do not confess and your
partner does, he will go free and you will get 20 years in jail. If, however,
neither of you confess, you will both be convicted of a minor charge (wasting
police time?) and you will serve three years in jail.’
Faced with this situation what would you do, bearing in mind that what hap-
pened to you as a result of your choice depended upon what your partner also chose
to do? The fact that it is not obvious what you should do is your dilemma. If you
could both co-ordinate your response, you would choose (presumably) not to
confess, but because you cannot co-ordinate your choices you face a far from
obvious choice: confessing gets you either ten years or release; not confessing gets
you either three years or 20 years.
Prisoner’s Dilemma has been much researched and written about in the 40 years
of its life. You should recognise the similarity between it and the currency game.
Both imply a benefit from co-ordination – explicitly denied to them in the rules of

7/8 Edinburgh Business School Negotiation

 Module 7 / Styles of Negotiation

the game – and both leave the players with the unhappy choice of defecting (in
Prisoner’s Dilemma choosing to confess; in Currency Dilemma choosing to hang
onto their own money), either to protect themselves or to take advantage of a co-
operative play by the other player.
It is inescapable that the rational choice is to defect, yet it is as inescapable that
this foregoes the benefits of co-operation. This conclusion has sometimes shocked
individuals who have faith in a greater goodness in humankind than the imperatives
of dilemma suggest is likely. But unless the imperatives of defection are acknowl-
edged it is unlikely that we can establish a basis, or a means to secure co-operation. I
can illustrate the contest between rationality and the benefits of co-operation with a
simple diagram based on a prisoner’s dilemma formulation of the choice between
war and peace. In Figure 7.3 two countries have a choice of using some of their
GNP to prepare for war or of using all their GNP for peaceful output.

Figure 7.3 War or peace?

As usual, their pay-offs do not just depend on their own choice but also depend
on the choice the other country makes. If both prepare for peace by having no war-
related expenditures at all, their GNPs would be 100 each (the numbers are not
relevant as it is the order and direction of their magnitude that count). However, if
country A prepares for peace, and has no means of waging war, it could be taken
over by country B if it prepares for war and invades country A. In this circumstance,
country A loses everything to country B and country B increases its GNP to 140
(some output is lost in the invasion and the rest is devoted to the costs of occupa-
tion). Similarly, the fate of country B could be decided if it chose peace and country
A chose war. Hence, both countries are compelled to choose to devote resources to
preparing for war, which reduces their civilian GNP to 80 each, and deters the other
from aggression. As a GNP of 80 is less than a GNP of 100, the rational choice has
reduced their GNPs below what is achievable in the absence of a risk of one of
them defecting. Unambiguously, the rational choice (and, I suspect, the only
electable choice) has made them both worse off.
Fine. But this leaves the problem of how we arrange co-ordination to make two
parties better off. This is the negotiator’s dilemma.
Merely deciding to be co-operative is fraught with dangers. The choice may be
unilateral but the outcome is dependent on the other negotiator’s independent
choice. Surely, you might interject, in negotiation we are not barred from communi-
cation, as in Prisoner’s Dilemma type games, and with communication we can
overcome the main barrier to co-ordination of choices. True, but the mere existence
of an ability to communicate does not eliminate the imperatives of a dilemma;

Negotiation Edinburgh Business School 7/9

Module 7 / Styles of Negotiation

indeed, communication can make co-ordination as difficult as if we were playing a

dilemma game.
Let me illustrate this assertion by a modified version of Prisoner’s Dilemma
which we have played with thousands of negotiators on our workshops. The version
presented here only sharpens the dilemma by adjusting the pay-offs. In its simplest
form the game can be played by any two negotiators, each of whom have two pieces
of paper, one of which is marked Red and the other is marked Blue. The players
independently choose which paper to reveal to the other (folded such as to be
unreadable before the simultaneous revelation) and they score points dependent on
the combinations of colours that are played in each round. They are told, without
elaboration or interpretation, only that their task is ‘to maximise their positive score’.
The pay-offs are as shown in Figure 7.4.

Figure 7.4 Red or Blue?

By now you should be familiar with how the game is played and you could use-
fully persuade a friend to play ten rounds with you to ensure that its lessons are fully
understood. For the first four rounds we replicate the Prisoner’s Dilemma situation
and permit no communication between the negotiators. Each hands over a folded
paper and receives a folded paper simultaneously. On opening the papers, the
negotiators note the combined plays and score them according to the pay-offs in
Figure 7.4. Thus, if they both have played Blue, they score 3 points; if they both play
Red they score 3 points; if negotiator A plays Blue and negotiator B plays Red,
then A scores 5 points; if negotiator A plays Red and negotiator B plays Blue, then
A scores +5 points.
After noting the scores for each round, the negotiators hand back the paper they
received and then choose which of their colours to play in the next round, repeating
the same performance for each round and scoring as above. At the end of four
rounds, they may communicate with each other and they may choose to co-ordinate
their play over the next four rounds. For example, they may choose to play Blue
together. If they do so, and if they keep to their agreement (it is a non-enforceable
contract!), they will score 4 × 3 = 12 points each. If either of them breaches the
agreement, they will score differently, though how differently will depend on when
they choose to defect.
At the end of the eighth round, they may again communicate and again they may
seek to co-ordinate their choices for rounds 9 and 10. However, to make things
interesting and to tempt defection, the scores for rounds 9 and 10 are doubled, both
positive and negative: two Blues score +6; two Reds score 6; a Blue played to a

7/10 Edinburgh Business School Negotiation

 Module 7 / Styles of Negotiation

Red scores 10; and a Red played to a Blue scores +10. At the conclusion of the ten
rounds each player adds up his total score.
The Red and Blue game permits two brief scheduled negotiations between the
players after rounds 4 and 8. They can agree to co-ordinate their scores but agree-
ment and implementation are vulnerable to defection still. People do not
automatically find the co-operative outcome merely because they can communicate.
It all depends upon the communication and what has happened between them in
the earlier rounds before they communicate.
Consider some results from our workshops. In round 1, the majority of negotia-
tors play Red, not Blue, that is they open with a hostile play. When asked why they
do this, the most common answer is that this minimises their risk of a loss, i.e. the
most they can lose is 3 and they have a possible gain of +5. This, remember, is the
rational play. They do not appear to consider the impact on the other player of their
opening with a Red, nor do they consider the fact that the game is played over ten
rounds and, whatever gains they might make in round 1, they are going to be
vulnerable to Red play for nine more rounds.
What of the negotiators – the minority – who open with a Blue? Their reasoning
is that they want to signal a desire for co-operation which, though laudable, is risky.
They risk losing 5 for a prospective gain in round 1 of +3. But though risky, this
play is sensible if co-operation is to be assured. Evidence of a willingness to co-
operate by playing Blue at the start of the game carries more weight with the
negotiators after round 4 than evidence of distrust (or worse, a desire to trump with
a Red) by playing Red in round 1. The Blue negotiator is definitely looking for co-
operation, while the Red negotiator may or may not be, depending on how we
perceive his motivations for playing Red (there are no prizes for guessing how most
people perceive such play).
What about round 2? Should the negotiator who played Blue and received a Red
continue to play Blue? Evidence suggests that the Blue player who has received a
Red switches to Red in round 2. Sometimes the player who played Red in round 1,
appears to regret his decision when he received a Blue, and plays Blue in round 2.
This is done to signal his regret and to show a willingness to co-operate from then
on. Unfortunately, this is often too late to obviate a Red from the previous Blue
player who has switched to Red in retaliation. However, if they can get to round 4
with at least a Blue play from each of them, it is highly likely that they will be able to
negotiate a co-operative agreement from then on as their actions support their
claimed wish to co-operate.
For some players, the communication after round 4 definitely helps and they are
able to find a basis for co-operation for the rest of the game. This appears to be
most common when there is an aggrieved negotiator who has played Blue at least
once and received only Reds in return. Here the nature of a trusting act is revealed.
Usually, the aggrieved negotiator who is at least – 5 points down on the first four
rounds compared to the Red negotiator – they both have negative scores – proposes
that they both play Blue over rounds 5 to 8, but because this calls upon him to show
his trust in the face of four rounds of Red play from the other negotiator, it is only
fair that he be allowed to play Red in round 5 to a Blue. By agreeing to this move,

Negotiation Edinburgh Business School 7/11

Module 7 / Styles of Negotiation

the Red player demonstrates his willingness to co-operate and allows the Blue player
to ‘catch up’ his score. If he delivers under this agreement, all is well and they both
end up with positive scores; if he defects again, the Blue player reverts to Red and
they both end up with negative scores.
Few pairs of negotiators end up with maximum positive scores of 36 points from
10 rounds of Blue play (and as few end up with negative scores of 36 each). Most
have scores of less than 36, indicating that there has been some mixed Blue and Red
play. A minority of negotiators fail to get a positive score and end up with negative
scores in the range 6 to 24. The imbalance between those getting positive scores
of less than 36 and those getting negative scores up to 24 suggests that communi-
cation does assist them to co-ordinate their play and to recover from early Red play.
Sometimes they apparently recover from early Red play and work together with
mutual Blue play for most of the rest of the game, but the past Red play can still
rankle enough for there to be a defection in rounds 9 or 10, which sets back their
scores if they both anticipate a defection by the other and hence defect to protect
themselves.
The negotiator’s dilemma can be summed up as follows: ‘If I act to protect my-
self from my vulnerability to the other negotiator’s predatory behaviour, I will be
assured of a smaller loss than if I actively trust the other negotiator’s good inten-
tions and discover afterwards that I was mistaken in trusting him. I know that my
act of self-protection is likely to be reciprocated by the other negotiator and we will
both be worse off than we might be if we could trust each other. I would like to be
different but can I take the risk? I wonder what he is thinking? Therefore, I defect,
not because I want to, but because I must.’
Negotiators face this dilemma every time that they negotiate. They may not con-
sciously think of themselves in a dilemma at all. They develop an approach to
negotiation, however, that indicates how they have decided to resolve the dilemma.
For some, their approach is blended with their personality; for others, it is adjusted
to the circumstances. But resolve the dilemma they do, for otherwise they would be
paralysed into indecision and no negotiations would take place at all.

7.4 Red, Blue and Purple Styles of Negotiation

The red–blue game is not identical to a negotiation because it operates under strict
rules and communication is highly restricted, whereas in negotiation there are no set
rules and communication is unrestricted. The red–blue dilemma has its lessons for
negotiators and is ever present. We can also make use of the concepts red and blue
for analysing aspects of negotiation behaviour. First, however, we need to shift the
meanings of ‘red’ and ‘blue’ slightly and introduce another colour, ‘purple’.
There are two main styles of negotiation behaviour. I shall describe them as Red
or Blue. Red can be thought of as a sign of danger, of war rather than peace and it
describes somewhat crudely the negotiating style that is based on ‘more for me
means less for you’. In its more extreme form it summarises the intentions of the
haggler in the distributive bargain: ‘Whatever else happens, I intend to get the largest
slice of the negotiator’s surplus.’ Red is results oriented. Blue is the opposite style to

7/12 Edinburgh Business School Negotiation

 Module 7 / Styles of Negotiation

Red. Blue is a sign of submission, of a preference for peace not war, of a desire for
tranquillity. It is based on the ethos that if giving more to the other player creates
the conditions for a happier relationship then it is better to save the relationship
than risk it in competition for the ‘largest slice’. In its extreme form a Blue style can
become so unselfish as to be positively self-destructive: ‘Whatever else happens, I
wish you to have as much as you want, even if there is little left for me because
whatever makes you happy makes me happy.’
It is possible to conceive of these contrasting styles by the more emotionally
loaded terms competitive (Red) and collaborative (Blue). But emotionally loaded
terms are not helpful when no moral judgement is implied, nor prescriptive prefer-
ence intended. Neither Red nor Blue style is optimal; one takes at the expense of
the other and the other gives to the singular benefit of the other; therefore neither
is a preferred style.
From observation, negotiators in the main adopt combinations of Red and Blue
styles according to their perceptions of how to do business. Some of this they learn
for themselves, some from their mentors, but mostly they have not thought about
their choices and if pushed they call it ‘experience’.

Negotiation Edinburgh Business School 7/13