A Recursive Protocol for Negotiating Contracts Under Non-monotonic Preference Structures

Negotiating contracts with multiple interdependent issues may yield non-monotonic preference spaces for the participating agents. These negotiations are specially challenging because of the complexity and dimension of the search space. Automated negotiation mechanisms designed and proven useful for monotonic utility spaces may fail in these negotiation scenarios. This paper presents a novel solution to the problem of automated multi-issue negotiations in the context of complex utility spaces. We seek to address the challenge of intractably large contract spaces and utility functions with multiple local optima in automated negotiation scenarios. A protocol for automated bilateral multi-attribute negotiation processes is proposed, in which the individual agents??preferences can be non-monotonic and discontinuous. The protocol is based on a recursive non-mediated bargaining mechanism, which involves two agents who simultaneously exchange proposals defined as regions within the negotiation space. An agreement on a region implies a new bargaining which is restricted to that region. This recursive process is governed by a set of rules which modulate the joint exploration of the negotiation space until an agreement is found or a deadline expires. The protocol is experimentally evaluated under monotonic and non-monotonic preference scenarios, confirming that the protocol is able to produce outcomes close to the Pareto frontier in acceptable negotiation time, outperforming previous approaches.     

Evaluations of Infinite Utility Streams: Pareto Efficient and Egalitarian Axiomatics

This investigation focuses on the aggregation of infinite utility streams by social welfare functions. We analyze the possibility of combining Pareto‐efficiency and Hammond Equity principles when the feasible utilities for each generation are [0, 1] and the natural numbers. In the latter case, the Hammond Equity ethics can be combined with non‐trivial specifications of the Pareto postulate, even through anonymous social welfare functions. As a consequence, any evaluation of infinite utility streams that verifies a mild specification of the Paretian axiom must exert some interference on the affairs of particular generations.     

Communication Quality in Business Negotiations

The quality of a business negotiation process is usually assessed by its economic outcome, e.g. in terms of Pareto efficiency or distance to Nash equilibrium. We argue that this assessment method is insufficient in that it fails to provide a comprehensive analysis of business negotiations. Negotiators engage in highly complex communication tasks, and these communication processes should be analysed along with the outcome in the overall evaluation of a business negotiation. To this end, we will introduce Communication Quality as a new construct for analyzing the negotiation process. Furthermore, it will be argued that Communication Quality itself can affect economic negotiation outcomes both short- and long-term. We will present relevant aspects of Communication Quality, outline a scheme for its operationalisation and measurement, and discuss its probable impacts on business negotiations.     

IS CORPORATISM FEASIBLE?

This paper investigates the effects of cooperation (corporatism) on macroeconomic performance by considering a rather standard policy game between the government and a monopoly union. We stress the shortcomings of the traditional way used to model cooperation in policy games (the maximization of the weighted sum of players’ preferences), which only approximates the Nash product solution. We find that it is difficult to implement corporatism, although it generally increases social welfare, as it often reduces the union's utility. In particular, we show that an inflation‐neutral union will never find it profitable to cooperate with the government, unless side‐payments are considered. The study of this issue, however, is beyond the scope of this paper.     

Resolving Impasses in e-Negotiation: Does e-Mediation Work?

In this article we evaluate the performance of an e-mediation system, referred to as VienNA, in an e-negotiation environment. A set of hypotheses drawn from the mediation and e-mediation literatures are explored. Bargaining processes, outcomes, and perceptions are compared for bargainers that have access to the VienNA system with those that do not have access during negotiation. Supporting several of the hypotheses, bargainers with access to the system were more flexible during the process, showed more concession reciprocation, sent more messages dealing with relationships and related sources of conflict, and were more satisfied with both the process and outcome. Early use of the system produced more flexible bargaining and better outcomes than later use, a finding that supports research on mediation in international conflicts. More balanced agreements occurred when bargainers consulted a form of advice known as fairness norms. Implications of these results for theory and practice are discussed along with suggestions for further research.     

Modeling the Caspian Sea Negotiations

The objective of this study is to identify techniques for predicting the outcome of a negotiation and then apply them to the current negotiations over the legal status of the Caspian Sea, which has been in dispute since the collapse of the Soviet Union. The five coastal states—Azerbaijan, Iran, Kazakhstan, Russia, and Turkmenistan—entered negotiations in 1993, but have not yet agreed on who owns the waters or the oil and natural gas beneath them. We identify the five well-defined options for resolving the dispute and then discuss the states’ preferences regarding these options. We apply some well-known social choice rules to find the “socially optimal” resolution. Then we review several versions of Fallback Bargaining, which aims to minimize the maximum dissatisfaction of the bargainers, and apply them to the dispute. Finally, we represent the dispute in financial terms and apply several well-known bankruptcy procedures, which are fair division methods for settling monetary claims. We end with some suggestions on how the value of the Caspian seabed resources could be allocated among the five Caspian states.     

Meta-level Coordination for Solving Distributed Negotiation Chains in Semi-cooperative Multi-agent Systems

A negotiation chain is formed when multiple related negotiations are spread over multiple agents. In order to appropriately order and structure the negotiations occurring in the chain so as to optimize the expected utility, we present an extension to a single-agent concurrent negotiation framework. This work is aimed at semi-cooperative multi-agent systems, where each agent has its own goals and works to maximize its local utility; however, the performance of each individual agent is tightly related to other agents’ cooperation and the system’s overall performance. We introduce a pre-negotiation phase that allows agents to transfer meta-level information. Using this information, the agent can improve the accuracy of its local model about how other agents would react to the negotiations. This more accurate model helps the agent in choosing a better negotiation solution for a distributed negotiation chain problem. The agent can also use this information to allocate appropriate time for each negotiation, hence to find a good ordering of all related negotiations. The experimental data show that these mechanisms improve the agents’ and the system’s overall performance significantly.     

A reappraisal of strategic trade policies with the endogenous mode of competition under vertical structures

This paper examines the endogenous choice of competition mode with strategic export policies in vertically related markets when each upstream firm located in each country determines the terms of the two-part tariff contract by maximizing generalized Nash bargaining. We show that (i) choosing Cournot (Bertrand) competition is the dominant strategy for both downstream firms when goods are substitutes (complements), which leads Pareto superior regardless of the nature of goods under the optimal trade policies; (ii) irrespective of rival’s competition mode, the optimal trade policy is an export subsidy under Cournot competition and an export tax under Bertrand competition; and (iii) trade liberalization may give rise to changes of competition mode and increase of social welfare.     

The Coordinated Effect of a Merger with Balanced Sharing of Collusive Profits

It is hard to assess the coordinated effect of mergers in solid and convincing fashion, in part because economic theory deals mainly with the sustainability of tacit collusion and generally does not explore the conditions that foster collusion in the first place. Also the most popular schemes of collusion (Joint profit maximization and Nash Bargaining) proposed by the economic literature seem at odds with the evidence recorded on cartels and with the practical attitude of entrepreneurs. In this scenario the recent version of the Horizontal Merger Guidelines contained the interesting suggestion to pay attention to the process - parallel behaviour – which leads to collusive equilibria. Working on the same intuition we propose an approach based on the idea that firms can always find a feasible collusive agreement, for every possible value of the factor which discounts future profits. Assuming that in order to collude, firms demand the fair sharing of collusive gains, we exploit the egalitarian property of grim trigger strategies when all incentive compatibility constraints are binding. This approach suggests using three indicators to determine whether and how a merger affects the probability of collusion. An application of this approach to a real-world case (the AT&T/T-Mobile merger) is provided.     

Dependence concentration and fairness perceptions in asymmetric supplier–buyer relationships

The purpose of this research is to investigate how a supplier manages its relationships with multiple buyers in a market structure of imbalanced power to achieve market success. Drawing on resource dependence theory and social exchange theory, we argue that dependence concentration (the degree of revenue concentration of a supplier’s multiple buyers) and fairness perceptions (distributive and procedural fairness) work together to impact a supplier’s market performance. The authors develop a structural model and empirically test how dependence concentration and fairness perceptions impact supplier performance with survey responses from 92 suppliers in the food supply industry. The findings show that a balanced set of dependence relationships governed by fair business policies and procedures leads to strong and effective relationships; and effective relationships with multiple buyers, rather than with any specific buyer, impact sales and profit growth in a market structure of imbalanced power.     

初次分配效率与公平的政策组合与效用选择

按照对效率与公平偏好的不同,初次分配效率与公平的政策组合有四种类型:"轻效率,轻公平"型;"轻效率,重公平"型;"重效率,轻公平"型;"重效率,重公平"型。不同社会发展阶段收入分配政策的制定实际上是对这四种政策组合的选择,以选择能带来最大化效用的分配制度。用分粥模型形象地对效率与公平的各种政策组合进行模拟,并根据收入分配效用函数对效率与公平政策组合的效用选择状况进行分析,结果表明,在初次分配"重效率"目标不变的前提下,消除收入分配不公平、减少贫富差距的关键在于同时建立初次分配"重公平"的机制。     

International trade agreements between countries of asymmetric size

This paper analyzes how changes in the structure and environment of trade agreements between a small and a large country affect the efficient frontier of those self-enforcing agreements and hence, negotiation outcomes. Using the autarky punishment instead of the interior Nash punishment may provide the small country with greater bargaining power. Negotiating direct transfers under free trade instead of reciprocal tariff reductions improves the worst possible negotiation outcome for the small country. The existence of irreversible investment may strengthen (weaken) the small country’s bargaining power under the interior Nash (autarky) punishment scheme.     

Conducting Dyadic Multiple Issue Negotiation Experiments: Methodological Recommendations

We take a critical, yet constructive look at the literature that focuses on multiple issue negotiation experiments. Our purpose is to offer suggestions for improvement when conducting such experiments. We focus on experiments, which are conducted using an externally imposed value point structure for the negotiators across issues together with background context information. Negotiator performance in such experiments is generally poor in the sense that Pareto inferior settlements are typically generated. A possible explanation is that negotiators sometimes follow the externally imposed value points and sometimes their own values pertaining to the context. Hence we conclude that it would be better if multiple issue negotiation experiments would not be based on an apriori given value point structure - unless we have compelling reasons for it - particularly if no agents are used. The common argument against doing this is that we cannot then identify Pareto optimal or Pareto preferred settlements for the subjects. Recent research integrating the fields of Multiple Criteria Decision Making (MCDM) together with negotiation analysis, however, provides a possible solution to this problem. An experiment conducted by the authors is used to illustrate our methodological recommendations.     

Justice and Fairness in Negotiation

In this special issue we display a variety of approaches to the study of justice. Articles from scholars working on questions involving justice and fairness in decision making exchanges calls attention to variety of research approaches, issue domains, cases and hypotheses used to explore these questions. All of the contributions emphasize analysis, using quantitative and qualitative methods including simulation-experiments, comparative case studies, statistical analyses and game theory. The articles in this collection reveal that justice and fairness concerns extend from the negotiation process to the outcome and into the implementation stage. They share the underlying expectation that individuals and groups gravitate toward fairness and justice in their exchanges with others. Therefore, a full understanding of group decision processes will be incomplete if justice and fairness issues are not considered alongside issues such as power distributions and alternatives to an agreement. The authors also suggest that outcomes built on justice and fairness principles will enhance the efficiency, stability and implementation of the negotiated agreements.     

The Generalized Nash Bargaining Solution for Transfer Price Negotiations Under Incomplete Information

In our model two divisions negotiate over type-dependent contracts to determine an intrafirm transfer price for an intermediate product. Since the upstream division’s (seller’s) costs and downstream division’s (buyer’s) revenues are supposed to be private information, we formally consider cooperative bargaining problems under incomplete information. This means that the two divisions consider allocations of expected utility generated by mechanisms that satisfy (interim) individual rationality, incentive compatibility and/or ex post efficiency. Assuming two possible types for buyer and seller each, we first establish that the bargaining problem is regular, regardless whether or not incentive and/or efficiency constraints are imposed. This allows us to apply the generalized Nash bargaining solution to determine fair transfer payments and transfer quantities. In particular, the generalized Nash bargaining solution tries to balance divisional profits, while incentive constraints are still in place. In that sense a fair profit division is generated. Furthermore, by means of illustrative examples we derive general properties of this solution for the transfer pricing problem and compare the model developed here with the models existing in the literature. We demonstrate that there is a tradeoff between ex post efficiency and fairness.     

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.     

Preference Structures of Negotiators and Negotiation Outcomes

Using a database collected during about 3,000 negotiation experiments, this paper analyzes how specific features of utility functions of negotiators, like attribute weights, monotonicity and convexity of marginal utility functions, are reflected in the outcomes of negotiations. We find that compromise values are to a considerable extent influenced by the utility functions. There are also significant impacts on the likelihood of achieving a compromise, but the model fit is considerably less than for compromise values.     

OPTIMAL INVESTMENT OF A LIFE INTEREST

We consider the problem of a trustee faced with investing a sum of money, the interest from which will be received by one party (the life-tenant) during his lifetime while the capital will go to another party (the survivor) on the death of the life-tenant. We assume mat there are n + 1 assets in which the trustee may invest— n risky assets of geometric Brownian motion type and one nonrisky asset. Under assumptions as to the utility functions of the two parties, we find the collection of Pareto optimal investment strategies for the trustee together with the corresponding payoffs. We do this by optimizing the payoff of the Lagrangian for the problem. We go on to present the Nash optimal solution for the trustee.     

A Generic Framework for Automated Multi-attribute Negotiation

Agents in a negotiation may have to negotiate multiple issues simultaneously. Automated multi-attribute negotiation provides an important mechanism for distributed decision makers to reach agreements on multiple issues. Moreover, it also furnishes the opportunity to reach “win–win” solutions. In this paper, we first provide a survey that synthesizes the research on multi-attribute negotiation. We discuss the limitations of the existing research and conclude that three key issues need further study: incomplete information, Pareto optimality, and tractability. We then present a generic framework for automated multi-attribute negotiation with two new mechanisms that address the above issues. Finally, we discuss the challenges and directions for future work.     

Fairness,Feelings, and Ethical Decision- Making: Consequences of Violating Community Standards of Fairness

In this article, we describe the influence of violations of community standards of fairness (Kahneman, Knetsch, and Thaler, 1986a) on subsequent ethical decision-making and emotions. Across two studies, we manipulated explanations for a common action, and we find that explanations that violate community standards of fairness (e.g., by taking advantage of an in crease in market power) lead to greater intentions to behave unethically than explanations that are consistent with community standards of fairness (e.g., by passing along a price increase). We find that perceptions of justifiability mediate this relationship. We also find that individuals derive significant psychological benefits (greater satisfaction, greater happiness, and reduced anger) from engaging in unethical behavior following perceived violations of fairness. Maurice Schweitzer is an Associate Professor at the Wharton School at the University of Pennsylvania. His research focuses on the negotiation process, and he is interested in deception, trust, and emotions. His work has appeared in several journals including the Academy of Management Journal, Management Science, Organizational Behavior and Human Decision Processes, and the Journal of Personality and Social Psychology. Donald E. Gibson is an Associate Professor at the Dolan School of Business, Fairfield University. His research focuses on emotions in the workplace, specifically anger. He also does research on organizational role models and social comparison processes. His work has appeared in journals including Organization Science, Journal of Management, Journal of Applied Social Psychology, and Journal of Vocational Behavior.