The Two Dollar Game
Prof. Mary Rowe, MIT

The Two Dollar Game is the opening game in Negotiation and Conflict
Management.
It was developed in order to illustrate some basic tools of negotiation theory, in the simplest possible game.
Major topics include:
• The nature of competition—“distributive” or “win-lose” bargaining—in which the gain of one person is the loss of another. This kind of bargaining is contrasted with collaborative (also known as “integrative” or “win-win”) bargaining in which both parties win.
In real life it can be difficult to illustrate pure win-lose bargaining, because true win-lose situations and pure win-win situations are relatively rare. (Most negotiations are actually “mixed motive” bargaining, including both distributive and integrative elements. Pure win-lose bargaining is rare in part because intangible elements like “relationship” enter into most negotiations. Pure win-win is rare because resources are scarce).
The Two Dollar game therefore illustrates all three strategies in negotiations. The game initially appears to be pure win-lose. But because of secret instructions, and the nature of repeat negotiations with the same person, the game will become a mixed motive game, or even integrative, in the last two rounds, if players trade money for intangible benefits.
• The concept of a “bargaining range” which can be negative, if there is no room for settlement—or positive, if there is room for settlement. It also introduces the idea of a Resistance Point or a “Reservation Point” (RP—the point at which a person will either stop bargaining, or move their RP to achieve a settlement.
The idea of the RP also introduces the idea of a fallback position or BATNA—the
Best Alternative To a Negotiated Agreement, since this best alternative usually defines where the RP will be. And it introduces the idea of a “target”—the amount that a person wishes to get in the process of bargaining.

• Major strategies that people adopt in negotiations: Competition, Collaboration,
Avoidance, Compromise, Accommodation, and Revenge. These strategies are the same as those we teach in the negotiation theory model, and the first five are also in the Thomas Kilman Questionnaire.
• How a player might be able to “diagnose” his or her own natural strategies in negotiation (strengths in strategic play and also strategic weaknesses). People who instinctively love the game (and many students do love this game) usually have strong Competitive skills. Some players easily Compromise ---in fact they will do this even if they are told not to. Those who instinctively hate the game may have high Avoidance or Accommodation scores in the Thomas Kilman Questionnaire.
People who “escape” the game and break the rules in order to create side deals often have Collaborative skills. And people who are vengeful on the third round begin to understand the Revenge strategy.
One can also possibly learn something about the natural strategies of the other player by observing how they play this game. The game is, thus, a quick diagnostic, in conjunction with the Thomas Kilman Questionnaire, for neophytes to learn their natural skills and vulnerabilities.
• An understanding of why “splitting the difference” is not the only way to divide what is on the table, and why it may or may not be the best way, in real life.
• The importance of intangibles (such as relationship, trust, friendly feelings) as well as tangibles (in this case money) as sources of value in a negotiation.
• The huge importance, in real life, of repeated interactions with the same person—in building or losing a good relationship. (We do not usually bargain just once with the same person. We often interact with the same person more than once. This means that even a simple game of dividing two dollars, in what is supposed to be a win-lose game, is not in fact purely competitive. Because of the effect of successive interactions, positive and negative feelings become part of the intangibles that