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348 Resource allocation and negotiation problems
Value for union
100
90
80
70
60
50
40
30
20
10
0
0 20 40 60 80 100
T
Value for management
Efficient
frontier
Figure 13.8 – Identifying the efficient frontier for the management–union negotiations
frontier. The problem is that in identifying such an agreement we would
have to compare the preference scales of the two parties. As we saw in
the previous chapter when we considered interpersonal comparisons of
preferences, such a comparison would require us to ask whether a swing
from a value of 0 to 100 on the management’s scale was greater or smaller
than a similar swing on the union scale. For example, it may be that the
management are far less concerned about a swing between these two
values than the union, in which case perhaps an efficient deal should be
selected which favors the union, but how can such comparisons be made?
In this problem we have assumed that management could make an
assessment of the union’s preferences and the trade-offs they were
prepared to make. Of course, in the atmosphere of intense negotiations
with each party using bluff, pretence and what Raiffa 4 calls ‘strategic
misrepresentation’ (i.e. ‘exaggerating the importance of what one is
giving up and minimizing the importance of what one gets in return’)
such an assessment may be difficult to make. Nevertheless, in any
negotiations it is necessary to form some idea of the other party’s
position, and analysis may lead to a sharper perception of this. In some
situations the parties in a dispute may be prepared to reveal their
preferences to a third party, who will then guide them to (or, in some
circumstances, impose upon them) an efficient deal.
A
X
B