Final answer:
In negotiations, a party may offer exactly at the other's reservation price, aiming for the best outcome without breaking the deal. The ultimatum game exemplifies negotiation dynamics, revealing that fairness and future relations impact decisions. Political bargaining shows a similar strategic complexity, with fairness and resource distribution being key elements.
Step-by-step explanation:
In the negotiation process, a party makes a final offer exactly at the reservation price of the other party when it discovers the maximum amount the other party is willing to pay or accept. This concept is based on the rationale that a negotiator aims to strike a deal which is as advantageous as possible, without causing the other party to walk away from the table.
The ultimatum game serves as a simplified model of negotiation. In this game, the first player (Player A) receives a sum of money and decides how much to offer to the other player (Player B). If Player B accepts the offer, both players get to keep their respective shares, but if Player B rejects the offer, neither player gets anything. Although a perfectly rational Player A might offer the lowest amount possible, expecting Player B to accept rather than receive nothing, experimental data shows that people are not completely self-interested and often reject unfair offers. Factors like future interactions and the desire for fairness influence the negotiation process significantly.
Taking it into the political arena, bargaining often reflects the need to distribute resources where multiple players may seek to change the rules while in play. Negotiations can fail if the parties have contrasting goals, and the desire to maintain the status quo can be a significant motive to prevent successful negotiations. Consequently, players might make fair offers to ensure cooperation and minimize the risk of complete negotiation breakdowns.