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Optimal Search in Negotiation Analysis

Author

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  • David A. Lax

    (Graduate School of Business Administration, Harvard University)

Abstract

A negotiator's reservation price or “bottom line†depends directly on the value of the no-agreement alternative to a proposed negotiated agreement. Often, one's no-agreement alternatives are uncertain and finding them requires a costly search, as in the case of a seller who must expend effort, time, and money in finding potential buyers. The value of the search should determine the seller's bottom-line or reservation price in dealings with a prospective buyer. Optimal search and stopping theory suggest useful procedures and heuristics for evaluating one's reservation price in negotiation and for searching among alternatives.

Suggested Citation

  • David A. Lax, 1985. "Optimal Search in Negotiation Analysis," Journal of Conflict Resolution, Peace Science Society (International), vol. 29(3), pages 456-472, September.
    • Handle: RePEc:sae:jocore:v:29:y:1985:i:3:p:456-472
    DOI: 10.1177/0022002785029003004
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    References listed on IDEAS

    as
    1. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey: Part I," Economic Inquiry, Western Economic Association International, vol. 14(2), pages 155-189, June.
    2. Joseph L. Gastwirth, 1976. "On Probabilistic Models of Consumer Search for Information," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(1), pages 38-50.
    3. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-654, May.
    4. Hey, John D., 1981. "Are optimal search rules reasonable? and vice versa? (And does it matter anyway?)," Journal of Economic Behavior & Organization, Elsevier, vol. 2(1), pages 47-70, March.
    5. Lippman, Steven A & McCall, John J, 1976. "The Economics of Job Search: A Survey," Economic Inquiry, Western Economic Association International, vol. 14(3), pages 347-368, September.
    6. M. Weitzman & K. W. S. Roberts, 1980. "On a General Approach to Search and Information Gathering," Working papers 263, Massachusetts Institute of Technology (MIT), Department of Economics.
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    Cited by:

    1. Hideyasu Sasaki, 2011. "A computing theory for collaborative and transparent decision making under time constraint," Information Systems Frontiers, Springer, vol. 13(2), pages 207-220, April.
    2. Lukasz W. Jochemczyk & Andrzej Nowak, 2010. "Constructing a Network of Shared Agreement: A Model of Communication Processes in Negotiations," Group Decision and Negotiation, Springer, vol. 19(6), pages 591-620, November.

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