The foundations of negotiation theory are decision analysis, behavioral decision-making, game theory, and negotiation analysis. Another classification of theories distinguishes between Structural Analysis, Strategic Analysis, Process Analysis, Integrative Analysis, and behavioral analysis of negotiations. Negotiation is a strategic discussion that resolves an issue in a way that both parties find acceptable. Individuals should make separate, interactive decisions; and negotiation analysis considers how groups of reasonably bright individuals should and could make joint, collaborative decisions. These theories are interleaved and should be approached from the synthetic perspective.
Common assumptions of most theories Negotiation is a specialized and formal version of conflict resolution, most frequently employed when important issues must be agreed upon. Negotiation is necessary when one party requires the other party's agreement to achieve its aim. The aim of negotiating is to build a shared environment leading to long-term trust, and it often involves a third, neutral party to extract the issues from the emotions and keep the individuals concerned focused. It is a powerful method for resolving conflict and requires skill and experience. Henry Kissinger defined negotiation as "a process of combining conflicting positions into a common position under a decision rule of unanimity, a phenomenon in which the outcome is determined by the process." Druckman adds that negotiations pass through stages that consist of agenda-setting, a search for guiding principles, defining the issues, bargaining for favorable concession exchanges, and a search for implementing details. Transitions between stages are referred to as turning points. Most theories of negotiations share the notion of negotiations as a process, but they differ in their description of the process. Structural, strategic, and procedural analysis builds on rational actors, who are able to prioritize clear goals, are able to make trade-offs between conflicting values, are consistent in their behavioral patterns, and are able to take uncertainty into account. Negotiations differ from mere coercion, in that negotiating parties have the theoretical possibility to withdraw from negotiations. It is easier to study bilateral negotiations, as opposed to multilateral negotiations.
Structural analysis Structural Analysis is based on a distribution of empowering elements among two negotiating parties. Structural theory moves away from traditional Realist notions of power in that it does not only consider power to be a possession, manifested for example in economic or military resources, but also thinks of power as a relation. Based on the distribution of elements, in structural analysis we find either power-symmetry between equally strong parties or power-asymmetry between a stronger and a weaker party. All elements from which the respective parties can draw power constitute structure. They may be of material nature, i.e., hard power (such as weapons), or of social nature, i.e., soft power (such as norms, contracts, or precedents). These instrumental elements of power, are either defined as parties’ relative position (resources position) or as their relative ability to make their options prevail. According to structural analysis, negotiations can be described with matrices, such as the Prisoner's dilemma, a concept taken from game theory. Another common example is the game of Chicken. Structural analysis is easy to criticize, because it predicts that the strongest will always win. This, however, does not always hold true.
Strategic analysis Strategic analysis starts with the assumption that both parties have a veto. Thus, in essence, negotiating parties can cooperate (C) or defect (D). Structural analysis then evaluates Á outcomes of negotiations (C, C; C, D; D, D; D, C), by assigning values to each of the possible outcomes. Often, cooperation of both sides yields the best outcome. The problem is that the parties can never be sure that the other is going to cooperate, mainly because of two reasons: first, decisions are made at the same time or, second, concessions of one side might not be returned. Therefore, the parties have contradicting incentives to cooperate or defect. If one party cooperates or makes a concession and the other does not, the defecting party might relatively gain more. Trust may be built only in repetitive games through the emergence of reliable patterns of behavior, such as tit-for-tat.
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