How can mixed strategies improve your negotiation skills?

2 Why use mixed strategies?

Mixed strategies can be useful for several reasons. First, they can help you avoid being exploited by your counterpart, who might anticipate your actions and respond accordingly. For example, if you always offer $20,000 for the car, your counterpart might always reject it and counteroffer with a higher price, knowing that you will not budge. By using a mixed strategy, you introduce some randomness and unpredictability into your behavior, making it harder for your counterpart to exploit you. Second, they can help you achieve a better outcome in situations where there is no dominant or optimal pure strategy. For example, if you are playing rock-paper-scissors with your counterpart, there is no pure strategy that guarantees you a win or a tie. However, if you use a mixed strategy where you play each option with equal probability, you can expect to win, lose, or tie with equal frequency, which is the best you can do in this game. Third, they can help you create value and expand the pie in negotiations, by allowing you to explore different options and trade-offs. For example, if you are negotiating the terms of a contract, a mixed strategy could involve offering different combinations of price, quality, delivery, warranty, and so on, with different probabilities, and seeing how your counterpart reacts. This way, you can discover their preferences and priorities, and find potential areas of agreement or mutual benefit.

3 How to use mixed strategies?

Using mixed strategies requires some analysis and creativity. You need to identify the possible actions that you and your counterpart can take, and the payoffs or consequences of each action. You also need to estimate the probabilities that your counterpart will choose each action, based on their incentives, beliefs, and expectations. Then, you need to design your own mixed strategy, by assigning probabilities to your actions, such that you maximize your expected payoff or utility. You can use tools such as decision trees, payoff matrices, or game models to help you with this process. You also need to be flexible and adaptable, by updating your probabilities and actions based on new information, feedback, or changes in the situation. Finally, you need to be aware of the limitations and risks of using mixed strategies. For example, you need to consider the ethical implications of using deception or bluffing, the communication challenges of conveying or hiding your intentions, and the psychological effects of uncertainty and ambiguity on yourself and your counterpart.

4 Examples of mixed strategies

Mixed strategies can be applied to various types of negotiations, such as distributive, integrative, or multiparty negotiations. For example, in a distributive negotiation, such as selling a house, one might list it at various prices with different probabilities to signal their willingness to negotiate and test the market. In an integrative negotiation, such as a salary package with an employer, one might propose different combinations of salary, bonus, benefits and perks with different probabilities to express preferences and priorities. In a multiparty negotiation, such as bidding for a project with competitors, one might submit different bids with different probabilities depending on the project specifications and the competitors' strategies. Additionally, they may form or break alliances with other bidders with some probability to enhance their bargaining power and influence. Mixed strategies can help create uncertainty and pressure on the other party while also protecting one's interests and leveraging potential win-win outcomes.

5 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?