Relinquishing Control


Giving up control of events can also strengthen your negotiating position. Imagine that you’re now a manager trying to resist wage increases. Your employees are extremely valuable to you, but unfortunately your workers are aware of their importance and know that you would be reluctant to lose them. You consequently have a weak negotiating position, for if your employees could ever convince you that they would leave if not given a raise, then you would give in to their salary demands. Giving up control of salary decisions could free you from this dilemma. Relinquishing control allows you to credibly claim that you can’t increase wages.

Of course, your precious employees could play their games with the people who now make the salary decisions. But these new salary setters might not care if an employee left. For example, the loss of an efficient secretary who understands your routine would be devastating. If the secretary grasps his importance, he has a very strong negotiating position if you have the power to grant him a raise. A manager in human resources, however, might not care if your efficient secretary quit. If your secretary had to negotiate with this indifferent manager, then his position would be weakened because the HR manager would be more willing to allow your secretary to leave the company than you would.

Telling others that you have given up control is a common negotiating tactic. When lawyers try to settle lawsuits, they often claim that their client has authorized them to go only to a certain amount. If this limitation on the lawyer’s authority is believed, then the lawyer’s promise to never accept a higher offer is credible. Broadcasting your lack of decision-making authority makes it easier to turn down unwanted requests.

An ancient English law punished communities that paid tribute to pirates.[3] Had a coastal community merely told pirates that they would never pay tribute, the pirates would probably not have believed them. The ancient law, however, made their statement more credible by effectively eliminating the option of paying tribute.

Smith College, where I teach, has a similar antitribute law that protects professors from students. At Smith College professors are not permitted to grant students extensions beyond the last day of finals, so students must go to their deans for such extensions. One might think this policy signals that Smith professors are administratively weak relative to deans. In fact, professors dislike dealing with students asking for extensions, so Smith professors are consequently made better off by a rule that circumscribes their extension-granting abilities. Managers can similarly benefit from limitations on their authority. Many managers, like professors, desire popularity and consequently dislike having to turn down their peoples’ requests. It’s much easier to say no when everyone understands that you lack the ability to say yes.

[3]Schelling (1960), 19.




Game Theory at Work(c) How to Use Game Theory to Outthink and Outmaneuver Your Competition
Game Theory at Work(c) How to Use Game Theory to Outthink and Outmaneuver Your Competition
ISBN: N/A
EAN: N/A
Year: 2005
Pages: 260

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