Rational Agents, Contract Curves, and Inefficient Compromises Report

Several studies of two-party negotiations have shown that negotiators more often than not reach inefficient compromises. We analyze the circumstances under which rational agents make inefficient compromises and refrain from improving them. We do this by describing and interpreting various negotiation situations and by developing formal constructs and theorems for determining the character of a negotiation situation. Key among these concepts is the notion of opposition. Although opposition is defined in terms of the utility functions, it is more fundamental in the sense that it is more intuitive to decision makers and can be used in contexts in which the parties' utilities are unknown or are partially known. The effects of various rationality assumptions on efficiency and their implications for negotiation support systems are discussed. We argue that the prescriptive/descriptive approach advocated by negotiation analysts lacks sufficient explanatory powers to be effectively used in negotiation support and that negotiation support systems should not constrain the parties to the set of efficient points

Rational agents, contract curves, and inefficient compromises

Abstract. Several studies of two-party negotiations have shown that negotiators more often than not reach inefficient compromises. We analyze the circumstances under which rational agents make inefficient compromises and refrain from improving them. We do this by describing and interpreting various negotiation situations and by developing formal constructs and theorems for determining the character of a negotiation situation. Key among these concepts is the notion of opposition. Although opposition is defined in terms of utility functions, it is more fundamental in the sense that it is more intuitive to decision makers and can be used in contexts in which the parties' utilities are unknown or are partially known. The effects of various rationality assumptions on efficiency and their implications for negotiation support systems are discussed. We argue that the prescriptive/descriptive approach advocated by negotiation analysts lacks sufficient explanatory powers to be effectively used in negotiation support and that negotiation support systems should not constrain the parties to the set of efficient points

Negotiating Inefficient Compromises: Is Less Better than More?

Significant efforts are made to design and implement decision and negotiation support systems to identify efficient alternatives. The underlying assumption is that decision-makers prefer an efficient alternative over an inefficient one. Experimental studies indicate that people often accept inefficient compromises and are unwilling to improve them even if prompted to do so. This report presents preliminary results for the analysis of 605 bilateral negotiations in which only 20.8% of negotiators who achieved an inefficient compromise entered the post-settlement phase in an attempt to improve the compromise

On the Actual Inefficiency of Efficient Negotiation Methods

In this contribution we analyze the effect that mutual information has on the actual performance of efficient negotiation methods. Specifically, we start by proposing the theoretical notion of Abstract Negotiation Method (ANM) as a map from the negotiation domain in itself, for any utility profile of the parties. ANM can face both direct and iterative negotiations, since we show that ANM class is closed under the limit operation. The generality of ANM is proven by showing that it captures a large class of well known in literature negotiation methods. Hence we show that if mutual information is assumed then any Pareto efficient ANM is manipulable by one single party or by a collusion of few of them. We concern about the efficiency of the resulting manipulation. Thus we find necessarily and sufficient conditions those make manipulability equivalent to actual inefficiency, meaning that the manipulation implies a change of the efficient frontier so the Pareto efficient ANM converges to a different, hence actually inefficient, frontier. In particular we distinguish between strong and weak actual inefficiency. Where, the strong actual inefficiency is a drawback which is not possible to overcome of the ANMs, like the Pareto invariant one, so its negotiation result is invariant for any two profiles of utility sharing the same Pareto frontier, we present. While the weak actual inefficiency is a drawback of any mathematical theorization on rational agents which constrain in a particular way their space of utility functions. For the weak actual inefficiency we state a principle of Result's Inconsistency by showing that to falsify theoretical hypotheses is rational for any agent which is informed about the preference of the other, even if the theoretical assumptions, which constrain the space of agents' utilities, are exact in the reality, i.e. the preferences of each single agent are well modeled

Searching for joint gains in automated negotiations based on multi-criteria decision making theory

It is well established by conflict theorists and others that successful negotiation should incorporate "creating value" as well as "claiming value." Joint improvements that bring benefits to all parties can be realised by (i) identifying attributes that are not of direct conflict between the parties, (ii) tradeoffs on attributes that are valued differently by different parties, and (iii) searching for values within attributes that could bring more gains to one party while not incurring too much loss on the other party. In this paper we propose an approach for maximising joint gains in automated negotiations by formulating the negotiation problem as a multi-criteria decision making problem and taking advantage of several optimisation techniques introduced by operations researchers and conflict theorists. We use a mediator to protect the negotiating parties from unnecessary disclosure of information to their opponent, while also allowing an objective calculation of maximum joint gains. We separate out attributes that take a finite set of values (simple attributes) from those with continuous values, and we show that for simple attributes, the mediator can determine the Pareto-optimal values. In addition we show that if none of the simple attributes strongly dominates the other simple attributes, then truth telling is an equilibrium strategy for negotiators during the optimisation of simple attributes. We also describe an approach for improving joint gains on non-simple attributes, by moving the parties in a series of steps, towards the Pareto-optimal frontier

Explaining Inefficient Policy Instruments

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

Can Reforms be Made Sustainable?: Analysis and Design Considerations for the Electricity Sector

This document discusses and proposes a new framework to improve the quality of programs supporting such reforms in Latin America. Firstly, it responds to the risk that the reforms in the region might be reversed, which might originate in the lack of public support for privatization and the succession of crises and events in the recent past (problems of supply in Chile and Brazil; price peaks in the spot market in El Salvador; the commercial unsustainability of the pool in Colombia; the ENRON/Andersen scandal, and the Argentine crisis among others), that have provided the enemies of reform with new political space. Secondly, it responds to evidence that the consolidation of sector reforms is not automatic, involving as it does the simultaneous creation of traditions of respect for the rights of investors and consumers. Finally, this paper partly builds upon the experience gathered from a project supporting the sustainability of electricity reform in Colombia, Guatemala and Honduras.Urban Development, Energy & Mining, electrcity sector, sustainable design, privatization, electricity reform

Modeling Business Negotiations for Electronic Commerce

E-commerce "localizes global markets" by opening remote markets to retail and to small companies. Newly developed E-commerce tools allow individual and organizational buyers to search for suppliers anywhere and make deals electronically. We propose a software agent that interacts with a buyer and elicits information about the criteria, preferences, and limitations, and that conducts business negotiation on behalf of the buyer. The agent has been implemented and tested in Negoplan, a software system that supports the simulation of decision processes. Results of several negotiation simulations are presented

Negotiation Via the World Wide Web: A Cross-Cultural Study of Decision Making

INSPIRE is a Web-based system for the support and conduct of negotiation. The primary uses of the system are training and research. Between July 1996 and April 1997, 281 bilateral negotiations were conducted through the system by managers, engineers, and students from over 50 countries. INSPIRE has been used at eight universities and training centers. In research it is being used to study cross-cultural differences in decision making and the use of computer support in negotiation. This paper outlines the system, the negotiation methodology embedded in it, and reports the initial results of the experimental study of the impact of culture on Web-based bilateral negotiation