Nir Halevy

C R O S S - C U L T U R A L

N E G O T I A T I O N

• New Negotiation Exercise: OmniChannel

• Incorporating Behavioral Game Theoryin Our Negotiation Courses

THE CHALLENGE

Context-Specific Negotiation Exercise

THE MEANS

Concrete Abstract

Context-NeutralGame Theoretic Tool

&

OmniChannel A New Cross-Cultural Negotiation Exercise

Amir KaspiDirector of Advertising

New Business DevelopmentGoogle

CONTEXT:

OmniChannel A New Cross-Cultural Negotiation Exercise

U.S. – China

Team-on-Team

Technology Licensing

WHY?

OmniChannel A New Cross-Cultural Negotiation Exercise

OmniChannel A New Cross-Cultural Negotiation Exercise

T h e P a r t i e s

OmniChannel 3DTV

T h e P a r t i e sOmniChannel

You are Alex Simmons, the head of the Business Development Team for OmniChannel, a

major player in the U.S. TV content market. Established in 1970, OmniChannel (OC) is a

publicly traded company that provides users with a one-stop-shop for over 100

channels. OC clients can also access 20 premium channels from PreimumTV that owns

the exclusive distribution rights to premium contents (e.g., HBO). OC users are paying a

monthly subscription fee to access the platform. OC has a 35% U.S. market share, 4000

employees, and a total revenue of $25M.

OC is currently developing a 4D TV platform, a strategic initiative that faces intense

competition in a very crowded space. OC estimates that the time-to-market of its next

generation TV platform, which would allow clients to view content in a 4-dimensional format,

is around 4 years. OC’s other strategic initiative, and the one in which you and your

team play a critical role, involves entering a licensing agreement to provide OC’s

content to consumers via a third party. OC is currently licensing and has the right to sub-

license 100 channels globally, in addition to the premium content. This is the first time that

the company is considering such an agreement.

T h e P a r t i e s3DTV

You are Hui Wang, head of the Business Development Team for 3DTV, a start-up in the TV

space that was founded three years ago, with a main office in Shanghai, China, and a

smaller office in Palo Alto, California. 3DTV develops the next generation of 3D video that will

allow users to see any content in 3D without wearing an external device (e.g., 3D

glasses). Your competitive advantage comes from a patent that allows you to turn any 2D

format into 3D; your most recent valuation was $100M. You have been working hard on a

technology that provides your users a one-stop-shop for all their digital and traditional TV

needs. Your unique platform allows users to watch the content either on typical 2D screen or in

3D without the need to use any external device.

3DTV plans on raising funds next year. To do well, you hope to show potential investors high

adoption rates. You have determined that the best way to achieve this strategic goal is to

partner with a major provider of regular 2D content in the U.S., and use your technology

to enable your subscribers to view it in 3D. …you have determined that the main potential

partner for such a deal is OmniChannel, a major player in the U.S. TV content market.

S t r u c t u r e

Issue Alternatives Points to Omnich.

Importance(Ordinal)

Importance(Ordinal)

Points to 3DTV

Issue Type

Fees for PremiumTVchannels

11,00012,00013,000 14,00015,000

01650330049506600

1 1 6600495033001650

0

Distributive

Termination Options (Months advance notice)

129631

01300260039005200

3 3 5200390026001300

0

Distributive

Fees for OC channels 600700800900

1000

-4800-3600-2400-1200

0

4 4 0-1200-2400-3600-4800

Distributive

# of PremiumTV channels licensed (Raw Channel Data & Meta Data)

05

101520

0600

120018002400

8 8 0600

120018002400

Compatible

# of OC channels licensed (Raw Channel Data & Meta Data)

60708090

100

-2000-1500-1000-500

0

9 9 -2000-1500-1000-500

0

Compatible

S t r u c t u r e

Issue Alternatives Points to Omnich.

Importance(Ordinal)

Importance( Ordinal)

Points to 3DTV

Issue Type

Length of Agreement 8 years7 years6 years5 years4 years

01100220033004400

5 2

6000450030001500

0

Integrative

Use of Manipulated Data* Perpetual rights* Temporary rights * No rights

017003200

7 638001900

0Integrative

Data License Restrictions * 2D or 3D format

* 3D format only

0

38006 7

3200

0Integrative

Fees for using 3DTV’s Data Centers

30,000 25,00020,00015,00010,000

01500300045006000

2 5

4400330022001100

0

Integrative

Imitating reality, some issues offer more alternatives than others

Learning Goals

Learning Goals

OmniChannel is designed to facilitate learning of the following concepts and processes:(1) Identifying issue types in negotiation (distributive, compatible, and

integrative issues)(2) Value-creating and value-claiming strategies in multi-issue

negotiations (e.g., logrolling, MESOs, anchoring)(3) Managing intragroup processes in negotiating teams (e.g., assigning

roles, caucusing)(4) Information asymmetry in negotiation (e.g., about preferences,

deadlines) (5) Cultural values and norms that influence cross-cultural negotiation

(e.g., hierarchy-egalitarianism, collectivism-individualism, tightness-looseness, communication and silence, corporate vs. start-up organizational cultures)

(6) Intergroup processes that can impact negotiation (e.g., the discontinuity effect, in-group bias, stereotypes and prejudice, diminished trust and heightened competitiveness between groups)

OmniChannelThe Cross-Cultural Element in

Students may:

(a) Come from diverse cultures. (b) Have first-hand experience with both successful and failed cross-cultural

negotiations; and (c) Have diverse experiences with cultural stereotypes, prejudice, and discrimination.

Hence, we recommend having a pre-negotiation in-class discussion about:

• The importance of treating all the cultures represented in the case with respect.

• The fact that cultures have, in addition to a mean tendency, also considerable variance around that mean tendency.

• The fact that the cultural information included in the OmniChannel case is designed to illustrate important processes in cross-cultural negotiation, rather than stereotype, and is based on relevant research.

OmniChannelThe Cross-Cultural Element in

OmniChannel side:

IMPORTANT INFORMATION FROM YOUR CEO ABOUT THE PROCESS

This is going to be a cross-cultural, American-Chinese negotiation.

Communication and information exchange may be challenging. We should act in

accordance with our principles and values. I fully expect you to:

(a) Assert our interests directly

(b) Push hard to get answers to your questions from the start

(c) Try to put the pressure on by targeting individual members of the other negotiating

team and by having multiple members of our team ask challenging questions

OmniChannelThe Cross-Cultural Element in

3DTV side: (following the same stem)

(a) Maintain the formality and hierarchy that we pride ourselves on. Only the leader of

the negotiation team should speak; everyone else should demonstrate utmost

respect and deference, and maintain the unity and harmony of the team.

(b) Be as minimal as possible in your communications. Always prefer silence over

chatter. Remember, the empty vessel makes the most noise.

(c) Be true to our principle of Guanxi - we only do business with others with whom we

have close ties. Thus, it is important that you establish relationships with the

Americans. You should spend the first 10 minutes of the negotiation on social

introductions, and asking the Americans about their families, hobbies, and

entertainment preferences (this information will be useful when we shall host them

in Shanghai).

Unique Add-on FeaturesThe OmniChannel negotiation exercise has two unique features that instructors can choose whether or not to implement:

Asymmetric deadlines

Representatives of OmniChannel are informed that they have 60 minutes

to complete the negotiation whereas representatives of 3DTV are

informed that they have 75 minutes.

Using this feature can facilitate post-negotiation in-class discussions

about how deadlines and impatience can shape negotiation processes

and outcomes and whether and when negotiators choose to disclose

their deadlines and other constraints.

Unique Add-on FeaturesThe OmniChannel negotiation exercise has two unique features that instructors can choose whether or not to implement:

Introducing a new constraint late in the negotiation

The Chinese firm—3DTV—can receive an email from their CEO 45

minutes into the negotiation indicating that due to changing regulations in

China they must insist on 9 months or a longer advance notice in case of

early termination of the partnership.

This feature can facilitate post-negotiation in-class discussions about:

governmental involvement in business negotiations in different countries

(incl. China); and how to respond when the other party wishes to re-

negotiate some of the terms of the deal.

Unique Add-on Features

Running OmniChannel 3-4 person teams (6-8 person negotiations)

Total preparation time: 40 minutes:

o 20 min. individual preparation

o 20 min. team preparation

Negotiation time: 60-75 minutes

o Not all teams reached agreement, some teams reported time pressure.

An excel spreadsheet is available to facilitate calculations of outcomes

o Entering data typically takes ~2 minutes per agreement.

Debrief time: 40-70 minutes. Longer timeframes enable incorporating

students’ input and pre-assigned readings into the discussion.

Calculating Outcomes

Calculating Outcomes

A Pareto-efficient agreement improves joint gains by 6,800 points relative to split-in-the-middle agreement.

Calculating Outcomes

Incorporating the constraint introduced by the Chinese government late in the negotiation gives 3DTV an advantage of 2,600 points

<=

Calculating Outcomes

A Pareto-efficient agreement improves joint gains by 2,200 points relative to a winner-takes-all agreement

Debrief ing OmniChannel

Debrief ing OmniChannelo Ask questions about the cross-cultural and team-on-team aspects of the

exercise: e.g., What about your culture’s negotiation style made you feel in-control and comfortable or disadvantaged and uncomfortable?

o Show students everyone’s outcomes in the negotiation. Lead a discussion about subjective value in negotiation.

o Invite the students to share with the class what they would do differently—both in terms of claiming value and in terms of creating value.

o Invite the students to ask others for, and provide others with respectful feedback

o Invite the students to relate their experiences in OmniChannel to real-world cross-cultural negotiations they experienced, as well as to concepts from the assigned readings.

Questions?

OmniChannel Negotiation Exercise

Context-Specific Negotiation Exercise

THE MEANS

Concrete Abstract

Context-NeutralGame Theoretic Tool

&

Cooperate

Cooperate Compete

Compete

Game Theory ’s Essent ia l Tool

• Actors• Act ions• Outcomes

I l lus t ra t ing the Role o f Percept ion & Mispercept ion in Negot ia t ion

The Premise

Negotiators’ construals of their payoffs — the games they think they are playing — are predictably variable and consequential.

Assessing students’ construals pre-negotiation can facilitate post-negotiation discussions of how different perspectives shape negotiation processes and outcomes.

Fill-in the numbers below using each number only once in each column: 4 – Best outcome; 3 – Good outcome; 2 – Bad outcome; 1 – Worst outcome.

Cooperative behaviors include (among others): Sharing information honestly, making concessions on low priority issues, engaging in mutually beneficial tradeoffs.

Competitive behaviors include (among others): Providing misleading information, refusing to make concessions on low priority issues, refusing to make mutually beneficial tradeoffs.

SCENARIO Our

Outcome

Their

Outcome

Both parties behave cooperatively

We behaves cooperatively; they behave competitively

We behaves competitively; they behave cooperatively

Both parties behave competitively

What Game Are We Play ing?

Halevy, Chou, & Murnighan, 2012, JPSP

Most negotiators create one of four archetypal games

Prisoner’s Dilemma

II

IC D

C 3,3 1,4

D 4,1 2,2

Chicken II

IC D

C 3,3 2,4

D 4,2 1,1

Assurance II

IC D

C 4,4 1,3

D 3,1 2,2

Maximizing Difference

II

IC D

C 4,4 2,3

D 3,2 1,1

Most negotiators create one of four archetypal games

The Games Negot ia tors Th ink They Are P lay ing Shape or Predic t :

• Deception

• Cooperation and competition

• Perspective-taking

• Social perception

• In-group bias

• Negotiation expectations

• Wealth accumulation in repeated interactions

Halevy, Chou & Murnighan, 2012, JPSP; Halevy & Katz, 2013 Current Directions in Psyc. Sci.

Halevy & Phillips, 2015, SPPS; Halevy, 2016 Advances in Experimental Social Psych.; Halevy, Sagiv, Roccas, &

Bornstein, 2006, PSPB

Using Empir ica l f ind ings to fac i l i ta te c lass d iscussions:

Halevy, Chou, & Murnighan, 2012 JPSP

Perceiving deal-making negotiation as a game of Chiken increases deception in negotiation

What Games Do They Think They Are Playing?

Quest ions?

T h e s e s l i d e s a r e a v a i l a b l e o n l i n e h e r e :

h t t p s : / / p e o p l e . s t a n f o r d . e d u / n h a l e v y / o t h e r - in t e r e s t i n g - s t u f f

T h e O m n i C h a n n e l C a s e w i l l h o p e f u l l y b e a v a i l a b l e s o o n v i a t h e D R R C :

h t t p : / / w w w . k e l l o g g . n o r t h w e s t e r n . e d u / r e s e ar c h / d r r c / t e a c h i n g - m a t e r i a l s . a s p x

THANKYOU

nhalevy@stanford.edu