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An illustrative problem 345
weekly pay, holidays and training to which an employee will be entitled).
Also, factors such as whether or not there are time constraints, whether
or not the final agreement is binding, the possibility (or otherwise) of
third-party intervention and the behavior of the participants (e.g. are
they honest, have they used threats?) will all vary from one negotiation
problem to another.
Of course, some of the techniques we have met in earlier chapters
might be useful when decision makers are involved in negotiations. For
example, decision trees can be used to represent the options open to a
negotiator and the possible responses of his opponent. Our intention
here is to focus on an approach which can be helpful when a dispute
involves just two negotiating parties who would like to reach agreement
on several issues. As we shall see, it is possible to exploit the different
levels of importance which the parties attach to each issue in order to
achieve joint gains and so reach deals which are beneficial to both parties.
An illustrative problem
The management of a hypothetical engineering company were engaged
in negotiations with a trade union. The union had put forward a package
in which they demanded a 15% pay rise, an extra 3 days’ holiday per
year for all employees and the reinstatement of a group of workers who
were fired after committing a breach of company regulations earlier in
the year.
Figure 13.7(a) shows the management’s value function over the range
of possible pay awards (it was thought that an award of at least 3%
would have to be conceded), together with their estimate of what the
union’s function would look like. Obviously, management attached the
lowest value to an award of 15%, while this was the award which was
most preferred by the union. Figures 13.7(b) and (c) show similar curves
for the other two issues.
Weights were then elicited from the management team to reflect their
view of the relative importance of swings from the worst to the best
position on each issue, and these weights are also shown in Figure 13.7.
Thus for the management team a swing from a 15% award to a 3% award
was seen as the most important: a move from granting 3 days’ holiday
to no days was only 50% as important as this and agreeing to the union’s
demand for worker reinstatement was only 10% as important. These
weights, which were subsequently normalized, enabled the overall value