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actors who could play the part. He had little added value and was happy to take the role for around $100,000. Home Alone went on to be the sixth highest grossing movie ever, and 20th Century-Fox grossed $286 million in the home market alone. There would surely be a sequel. But this time Macaulay had the added value.4 To the moviegoing public, Macaulay Culkin was Kevin McCallister. The studio couldn’t turn to another fresh face or even turn to another child star. So for Home Alone 2: Lost in New York, Macaulay got paid around $5 million, plus 5 percent of the domestic gross. The sequel grossed $174 million, and that added another $8.7 million to Macaulay’s paycheck, helping him become the youngest of Hollywood’s top-forty grossing actors.

Disney has a magic wand for creating unpaid stars. Its recent animated features—The Little Mermaid, Beauty and the Beast Aladdin, The Lion King, and Pocahontas—have been some of the most profitable movies of all time. There are no human stars to pay, only animators. And the animators haven’t been able to demand much of the pie because, individually, no animator has had much added value. That’s because many animators work on each character, and no one person is irreplaceable. So Disney has kept the pie to itself. Today the animation game is in a state of flux. The added value of an animator is rising because Dreamworks SKG—the Steven Spielberg, Jeff Katzenberg, David Geffen outfit—is in the market alongside Disney to make animated features. On the other hand, Disney’s smash success, Toy Story, replaces human animators with computer-generated imagery.

2. Rules

In the Card Game, there was no structure to the negotiations. Adam could make an offer to any of the students in any order, and the students could make any counteroffers they saw fit. If Adam and a student didn’t reach an immediate agreement, the student could count on Adam’s coming back later. There was no time limit on the negotiations.

Some negotiations are free-form, but others have rules. In business, you may have to give the same price to every customer. If so, that’s a rule of the game. Or you may have a “last-look” provision that gives you the option to keep your customer’s business provided you match any competing bid. That could be another rule of the game. When supermarkets post prices on their goods, they’re making a take-it-or-leave-it offer to customers. Another rule. In fact, this is the rule for most retailers. Nor is it just sellers who get to post prices; sometimes, buyers do, too. When employers go to buy someone’s services, they often specify the terms and salary for the job, and there’s very little room for further negotiation.

There are many rules governing negotiations in business. These rules come from custom, contracts, or law. Like added value, rules are an important source of power in games.

To see how rules can change the game, we return to the Card Game and add a simple rule: only Adam can make offers. As before, a black card and a red card together are worth $100. Adam has twenty-six black cards and each of the twenty-six students has one red card. But now it’s a one-shot, take-it-or-leave-it negotiation—an “ultimatum” game, if you like. As a student, you can either accept or reject Adam’s offer. If you accept, the deal is done. If you reject, the game is over. You can’t make a counteroffer; nor can Adam come back with a better offer. Either the deal is done or it’s lost forever. Adam has only one chance with each student, and vice versa.

It’s All in the Cards—a New Deal This time, imagine that you’re playing Adam’s role. How much would you offer a student for his or her card? Should you split the pie 50/50? Or can you do better than that? Alternatively, would you be lucky to do that well?

When we play this ultimatum game in the classroom, the results are remarkably consistent. We ask someone to play Adam’s role. In the first negotiation, the person playing Adam typically offers $50, and this offer is accepted. The two parties split the $100 equally, and the first negotiation is over.

This