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Oil Pricing is a multi-round team-based negotiation. Participants are divided into two teams that act as two fictional countries’ Oil Pricing Boards – Alba and Batia. Alba and Batia sell a significant amount of their production to nearby Capita. Anti-dumping agreements and Capita’s alternate supply options limit the prices that Alba and Batia are able to charge, and thus limit their profits. Participants are advised that maximizing their own country’s profits is their sole objective.
This exercise presents rich opportunities to observe, analyze, and critique intra-group dynamics and decision making. It takes 2 hours and 15 minutes – 3 and a half hours to run and review. It is best suited for Negotiation Courses.
This is a so-called “social trap” exercise, in which long-term maximization requires unenforced mutual trust where significant short-term gains are possible by breaking that trust. In most rounds, communication must be implicit, and is hence highly ambiguous and subject to misinterpretation, usually by the projection of negative and adversarial intentions that don’t actually exist. At certain points, the parties are given the opportunity to communicate explicitly, and may choose to reach pricing agreements or not (and subsequently, to honor those agreements or not).
The exercise highlights the frequency with which we make imprecise and inadequately supported assumptions, suggesting the importance of making and keeping assumptions explicit and testing them periodically.
The danger of self-fulfilling assumptions is also illustrated. Parties can turn cautious competitors into the cutthroat adversaries they fear by proceeding with pre-emptive ruthlessness
Assumptions; Commitment; Communication; Competition v. Cooperation; Compliance; Constituents; Credibility; Decision analysis; Education, as a means; Ethics; Game theory; Group process; Group-think; Joint gains; Managing uncertainty; Meaning of “success”; Message analysis; Misrepresentation; Recurring negotiations; Risk aversion; Risk perception; Trust
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