Qualitative One-to-Many Multi-Issue Negotiation: Approximating the QVA

When there is one buyer interested in obtaining a service from one of a set of sellers, multi-attribute or multi-issue auctions can ensure an allocation that is efficient. Even when there is no transferable utility (e.g., money), a recent qualitative version of the Vickrey auction may be used, the QVA, to obtain a Pareto-efficient outcome where the best seller wins. However, auctions generally require that the preferences of at least one party participating in the auction are publicly known, while often making this information public is costly, undesirable, or even impossible. It would therefore be useful to have a method that does not impose such a requirement, but is still able to approximate the outcome of such an auction. The main question addressed here is whether the Pareto-efficient best-seller outcome in multi-issue settings without transferable utility (such as determined by the QVA) can be reasonably approximated by multi-bilateral closed negotiation between a buyer and multiple sellers. In these closed negotiations parties do not reveal their preferences explicitly, but make alternating offers. The main idea is to have multiple rounds of such negotiations. We study three different variants of such a protocol: one that restricts the set of allowed offers for both the buyer and the seller, one where the winning offer is announced after every round, and one where the sellers are only told whether they have won or not after every round. It is shown experimentally that this protocol enables agents that can learn preferences to obtain agreements that approximate the Pareto-efficient best-seller outcome as defined by the auction mechanism. We also show that the strategy that exploits such a learning capability in negotiation is robust against and dominates a Zero Intelligence strategy. It thus follows that the requirement to publicly announce preferences can be removed when negotiating parties are equipped with the proper learning capabilities and negotiate using the proposed multi-round multi-bilateral negotiation protocol.     

Procurement auctions and negotiations: An empirical comparison

Real-world procurement transactions often involve multiple attributes and multiple vendors. Successful procurement involves vendor selection through appropriate market mechanisms. The advancement of information technologies has enabled different mechanisms to be applied to similar procurement situations. However, advantages and disadvantages of using such mechanisms remain unclear. The presented research compares two types of mechanisms: multi-attribute reverse auctions and multi-attribute multi-bilateral negotiations in e-procurement. Both laboratory and online experiments were carried out to examine their effects on the process, outcomes, and suppliers’ assessment. The results show that in procurement, reverse auctions were more efficient than negotiations in terms of the process. Auctions also led to greater gains for the buyers than negotiations, but the suppliers’ profit was lower in auctions. The buyer and the winning supplier jointly reached more efficient and balanced contracts in negotiations than in auctions. The results also show that the suppliers’ assessment was affected by their outcomes: the winning suppliers had a more positive assessment toward the process, outcomes, and the system. The findings are consistent in both the laboratory and the online settings. Finally, the implications of this study for practitioners and researchers are discussed.     

Multi-bilateral Multi-issue E-negotiation in E-commerce with a Tit-for-Tat Computer Agent

We discuss multi-bilateral multi-issue electronic negotiation (e-negotiation) in the context of an e-commerce marketplace system in which multiple players – buyers and sellers – conduct bilateral (pair-wise) multi-attribute negotiations followed optionally by an auction. Negotiators both make and request specific concessions. The concept of a tit-for-tat concession strategy is developed and implemented by a computer agent. The work is related to the Evolutionary Systems Design (ESD) framework for formal modeling/design of Purposeful Complex Adaptive Systems (PCAS).     

Competition between auctions

Even though auctions are capturing an increasing share of commerce, they are typically treated in the theoretical economics literature as isolated. That is, an auction is typically treated as a single seller facing multiple buyers or as a single buyer facing multiple sellers. In this paper, we review the state of the art of competition between auctions. We consider three different types of competition: competition between auctions, competition between formats, and competition between auctioneers vying for auction traffic. We highlight the newest experimental, statistical, and analytical methods in the analysis of competition between auctions.     

Towards a Structured Design of Electronic Negotiations

Global communication networks and advances in information technology enable the design of information systems facilitating effective formulation and efficient resolution of negotiation problems. Increasingly, these systems guide negotiators in clarifying the relevant issues, provide media for offer formulation and exchange, and help in achieving an agreement. In practice, the task of analysing, modelling, designing and implementing electronic negotiation media demands a systematic, traceable and reproducible approach. An engineering approach to media specification and construction has these characteristics. In this paper, we provide a rationale for the engineering approach that allows pragmatic adoption of economic and social sciences perspectives on negotiated decisions for the purpose of supporting and undertaking electronic negotiations. Similarities and differences of different theories that underlie on-going studies of electronic negotiations are identified. This provides a basis for integration of different theories and approaches for the specific purpose of the design of effective electronic negotiations. Drawing on diverse streams of literature in different fields such as economics, management, computer, and behavioural sciences, we present an example of an integration of three significant streams of theoretical and applied research involving negotiations, traditional auctions and on-line auctions.     

Ups and Downs: Emotional Dynamics in Negotiations and Their Effects on (In)Equity

Organizational scholars now acknowledge the relevance of emotions in virtually every aspect of organizational life, including negotiations and conflict resolution. Integrating negotiation phase model theory with social functional models of emotion, we test hypotheses about the development of emotions in negotiations and their effects on the degree of economic (in)equity of the counterpart’s subsequent offer during the actual negotiation process. By comparing stalemate dyads with efficient settlement dyads, the study identifies emotional dynamics that characterize successful as opposed to unsuccessful negotiations. Results show that observed differences are primarily the result of impasse dyads spiraling into a negative emotional climate rather than efficient settlement dyads having overall higher levels of positive emotions or increasing them throughout the negotiation process. As predicted by social functional models, the study further confirms that emotions are not only a reaction to the economic (un)fairness of a proposed offer, but their display also influences the payoff (in)equity of the counterpart’s subsequent offer. Whether a specific emotional expression increases or decreases the economic fairness of the counterpart’s subsequent offer, however, differs across negotiation phases and between dyads that reached an agreement or not. Furthermore, the results show distinct differences between emotions that address individual goal realization in negotiations and emotions that focus on the relational, interpersonal aspect of negotiations, both with regard to their development as well as their function. Taken together, the results shed light on the mechanisms leading to the emergence of conflict spirals.     

The impact of expectation of future negotiation interaction on bargaining processes and outcomes

This research conceptualizes and experimentally tests differences in pre-negotiation behavioral influences, negotiation processes, negotiation outcomes, and post-negotiation dispositions involving buyers and sellers negotiating under the expectation of future negotiation interaction (EFNI) versus no expectation of future interaction (Non-EFI). EFNI bargainers have lower aspiration levels, expect the negotiations will be friendlier, and predominantly use a problem-solving bargaining style compared to Non-EFI bargainers. Perforce, EFNI appears to have a strong moderating effect on satisfaction as Non-EFI bargainers' satisfaction is strongly predicated on their monetary outcomes (expectation-disconfirmation paradigm), while EFNI bargainers' satisfaction is not. Further, while EFNI negotiations take longer than Non-EFI negotiations, they also produce greater parity between buyers' and sellers' satisfaction, which leads to fewer bargainers being dissatisfied. Thus, compared to one-time negotiations, bargainers in EFNI contexts are more likely to be disposed to bargain again, to enter into negotiations with a harmonious disposition and seek solutions that benefit both parties.     

The Montreal Taxonomy for Electronic Negotiations

Research in the domain of electronic negotiations is a rather new and very interdisciplinary field, which gains more and more attention due to the industry hype and momentum regarding electronic commerce and electronic markets. Negotiations in a narrow sense (not taking into account simple forms such as hit and take) have been identified as an advantageous coordination mechanism for the interaction of buyers and sellers in electronic markets that transcend the selling of commodities or uniform goods. Hence, support for negotiations may become a critical success factor for electronic markets, especially regarding the recent failures of many industrial ventures. This paper presents the Montreal Taxonomy, which allows not only for the exact characterisation and comparison of a broad variety of electronic negotiation designs and systems, ranging from auctions to bilateral bargaining tables, but could also lead towards a more structured approach for the design of electronic negotiations.     

Emic and etic interpretations of engagement with a consumer-to-consumer online auction site

This paper provides emic and etic interpretations of engagement with a consumer-to-consumer (C2C) online auction site, based on in-depth interviews with buyers. The study exposes three misconceptions about online C2C auctions; that the interaction between parties occurs exclusively online, that the relation between buyers and sellers is purely transactional in nature, and that the interaction between buyers and sellers does not lead to ongoing business relationships. The paper reveals the utilitarian, hedonic and social benefits that are the bases of engagement with the auction site. Social benefits materialize for auction buyers during offline exchanges. The paper also reveals marketer incentives and structural disincentives for consumers' ongoing use of the auction site.     

Culture's Influence on Business Negotiations in Four Countries

The usefulness of a theoretical model of the determinants of business negotiation outcomes is tested in a simulation with business people from four countries (the United States, Japan, Brazil and Spain). The article is an extension of Graham, Mintu, and Rodgers (1994), and also directly tests Hofstede's and Hall's theories of culture. A problem-solving approach results in higher negotiation outcomes for Americans when their partners reciprocate. Role (buyer or seller) is the key determinant of profits for Japanese negotiations; that is, buyers do better than sellers. For the Spanish negotiators, a problem-solving approach actually yielded lower profits. For the Brazilians, interpersonal attractiveness lead to higher partner satisfaction.     

The process of assisted negotiations: A network analysis

This article introduces network analysis as a supplement to current research on the process of negotiations. We briefly review the literature on negotiations involving third parties, and argue that to understand fully the dynamics of dispute resolution, it is important to examine processes in addition to outcomes. We propose social network methods as a way to examine systematically the step-by-step process through which self-interested third parties influence negotiated outcomes. To illustrate, we analyze process data from triads in an agent-assisted negotiation. We describe three classes of results. First, we describe the basic properties of the third-party-assisted negotiation process (e.g., we found agents to be the most active players in the negotiation process—they initiate interactions significantly more frequently than buyers or sellers). Second, we study the changes in the process characteristics due to experimental conditions (i.e., we found the interactive patterns to vary depending on the information made available to the third party). Finally, we examine the relationships between the systematic process measures and standard outcome measures. We argue that these measures are complementary, and that the process should be informative with respect to interpreting, predicting, and managing outcomes.This research was supported in part by a grant from the Dispute Resolution Research Center.     

A Multi-Attribute Negotiation Support System with Market Signaling for Electronic Markets

Despite the rapid growth of technology and Internet-based markets, many of the current systems limit themselves to price as the single dimension variable and offer, if at all, only minimal negotiation support to the consumer. In the real world, commercial transactions take into account many other parameters both quantitative and qualitative such as product quality, speed, reputation, after sales service, etc. This paper discusses how these multiple attributes can be captured to augment standard negotiation processes in order to support electronic market transactions. Using a combination of utility theory and multicriteria decision-making, we propose heuristic algorithms to discover potential trades. In addition, the approach is included within a larger framework that incorporates market-signaling mechanisms. This not only allows for the systematic evolution of negotiation positions among buyers and sellers but can ultimately lead towards improving both market transparency and efficiency. To illustrate the multiple criteria model coupled with the dynamic market signaling framework, we report in this paper the implementation of a Web-based clearinghouse that serves the real estate market.     

Effect of Reputation Mechanisms and Ratings Biases on Traders’ Behavior in Online Marketplaces

Rating mechanisms are becoming an essential tool for online shoppers. There have been many reputation mechanisms proposed in the literature that try to mitigate the sometimes adverse effects of strategic behavior of the traders to alter their true reputation scores. At the same time, several studies have shown the presence of bias (often unintentional) in product ratings and their harmful effect on buyers and product sales. To date, there has not been any work done that studies the effect of reputation mechanisms and ratings biases on the behavior of buyers and sellers in an online marketplace. In this article, we use the concept of replicator dynamics to study the evolution of different types of sellers and buyers who use three different reputation mechanisms. We also study the evolution of different types of sellers in the presence of four types of ratings biases. Our results indicate that, over time, buyers gravitate toward using the adaptive model and, in most scenarios, strategic and dishonest sellers are replaced by honest sellers.     

How Verifiable Cheap-Talk Can Communicate Unverifiable Information

This study describes a “cheap-talk” model in which sellers can credibly convey unverifiable information by choosing whether or not to exaggerate verifiable information. We find that unexaggerated claims can communicate favorable unverifiable information if buyers are not too likely to verify claims, and sellers with better information care more about future prices than sellers with worse information. However, there is always another equilibrium in which sellers exaggerate all verifiable claims. Laboratory tests show that when buyers infrequently verify the sellers' claims, players converge to the equilibria close to the example provided in instructions. When buyers are very likely to verify claims, players fail to converge to any equilibrium. Both of these results are consistent with an evolutionary learning model, but inconsistent with the intuitive criteria of Cho and Kreps (1987). We discuss the implications of our results for both consumer and financial markets. Helpful comments were received by an anonymous reviewer, Mark Nelson, many doctoral students at Cornell University, and Accounting workshop participants at the University of Texas at Austin. JEL Classification: C73, C92, G14, M3     

Auction Fever! How Time Pressure and Social Competition Affect Bidders’ Arousal and Bids in Retail Auctions

Auction sites on the Internet frequently put bidders under time pressure or highlight the social competition that is inherent to auctions. Both aspects are believed to elicit an exciting shopping experience, which may culminate in auction fever. In two laboratory experiments, we investigate the process of auction fever in retail auctions and demonstrate when and how auction fever affects bidding behavior. In contrast to previous studies, we employ physiological measurements as an objective and continuous assessment of bidders’ arousal in addition to a subjective assessment of bidders’ emotions through psychometric scales. Moreover, we explicitly study the interaction of time pressure and social competition on arousal and bids. We find that bidders’ arousal is increased in high time pressure auctions and that this leads to higher bids in ascending auctions—but only when bidders compete with human opponents. Thus, social competition is the actual driver underlying the auction fever phenomenon. Furthermore, we show that the “joy of winning” is significantly stronger than the “frustration of losing” in ascending auctions. Finally, we discuss the implications of our findings for the design of retail auctions.     

Betrayal in buyer–seller relationships: Exploring its causes,symptoms, forms,effects, and therapies

Building on literature in social psychology that discussed betrayal in interpersonal relationships, this article explored betrayal in buyer–seller relationships using data collected from a survey conducted among 109 buyers and 115 sellers in the United States. The results indicated that betrayal was a complex, multifarious, and dynamic phenomenon, consisting of a sequence of phases, namely causes, symptoms, forms, consequences, and therapies, with multiple issues being involved at each phase. Our study also revealed that the views of buyers differed from those of sellers in terms of how various relational characteristics contributed to the emergence of betrayal episodes, what behavior and attitudes helped to diagnose partner betrayal, in which forms the betrayal acts were manifested, how the victims of betrayal felt, and how betrayal problems could be handled in a working relationship. In fact, the various dimensions in each of the betrayal phases examined were consistently more frequently mentioned by buyers than sellers.     

The interaction of reward contingencies and causality orientation on the introduction of cooperative tactics in buyer–seller negotiations

This article reports results of an experiment designed to see if reward contingencies and individual differences in causality orientation can interact to affect the frequency with which buyers and sellers introduce cooperative tactics into a sales negotiation. A face‐to‐face simulation is employed to consider these effects. A 2 × 2 ANOVA (task‐contingent/task‐noncontingent rewards × control/autonomy orientation) tests this interaction. These two factors interact to affect cooperation. A buyer or seller with an autonomous causality, in a situation with task‐noncontingent rewards, is most likely to introduce cooperative negotiation tactics. Task‐noncontingent rewards are more effective than task‐contingent rewards for autonomous causality buyers and sellers, but not for control causality buyers and sellers. © 2001 John Wiley & Sons, Inc.     

To Discount or Not to Discount: An Assessment of Perceptions,Beliefs, and Intentions to Use Electronic Auctions with Discounts

In the digital economy, electronic auction systems are becoming more prevalent in facilitating the transactions between buyers and sellers. Auction websites, such as eBay and Amazon, as well as more sophisticated platforms, such as Moai and FrictionlessCommerce have increased transaction volume by offering tailored auction protocols to specific customer groups. meet2trade is a generic electronic market platform that supports various auction mechanisms. This study examines the impact of a discount in a second-price, sealed-bid mechanism on bidding behavior and market outcomes. Emphasis is thereby placed on bidders’ system-based perceptions, beliefs about usage and institutional-based trust, and intention to use such an auction. Ninety students were recruited to participate in an experiment held at a Western European university. The experiment observed user behavior in second-price auctions with and without a discount. The results demonstrate that although discounts do affect bidding behavior and economic outcomes, they do not influence bidder’s intentions to use such auction mechanisms. Instead, we found that intention to use is influenced by institutional and usage beliefs that are shaped by system-based perceptions, which in turn provide specific advice to market engineers on the technical aspects influencing system adoption.     

Traders’ Subjective Appraisals: Comparison of Negotiations and Auctions

ABSTRACT

The assessments of business trade often involve economic and relational concerns. They may become more challenging when our understanding of the impacts of trading mechanisms is still limited. The current experimental study compares two generic trading mechanisms, namely, multibilateral multi-issue negotiations and multicriteria auctions. By examining economic measures and subjective appraisals in controlled exchange episodes, the study shows some subtle relationships between mechanism use, substantive outcomes, and subjective appraisals. While use of negotiations versus auctions did not reveal significant differences on economic measures, traders are strongly influenced by the gain-or-loss contingency. When they win a contract, their subjective appraisals are heavily influenced by their achieved substantive outcomes. When they do not win a contract, they feel auctions are better than negotiations. The results confirm the assessments of business trade that rely solely on substantive measures are not sufficient.     

Protocols for automated negotiations with buyer anonymity and seller reputations

In many Internet commerce applications buyers can easily achieve anonymity, limiting what a seller can learn about any buyer individually. However, because sellers need to keep a fixed web address, buyers can probe them repeatedly or pool their information about sellers with the information obtained by other buyers; hence, sellers' strategies become public knowledge. Under assumptions of buyer anonymity, publicly‐known seller strategies, and no negotiation transaction costs for buyers, we find that take‐it‐or‐leave‐it offers will yield at least as much seller profit as any attempt at price discrimination could yield. As we relax those assumptions, however, we find that sellers, and in some cases buyers as well, may benefit from a more general bargaining protocol. This revised version was published online in June 2006 with corrections to the Cover Date.