Erratum to Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO

Trade negotiations occur through time and between the governments of many countries. An important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party. We identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation. Our main finding is that the two central principles of GATT/WTO—nondiscrimination (MFN) and reciprocity—preserve the welfare of nonparticipating governments and therefore offer a “first-line of defense” against bilateral opportunism.     

Multilateral trade negotiations, bilateral opportunism and the rules of GATT/WTO

Trade negotiations occur through time and between the governments of many countries. An important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party. We identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation. Our main finding is that the two central principles of GATT/WTO—nondiscrimination (MFN) and reciprocity—preserve the welfare of nonparticipating governments and therefore offer a “first-line of defense” against bilateral opportunism.     

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.     

Response modes in negotiation

Negotiators may respond to each other’s offers and demands in different ways. Whereas many negotiation experiments present participants with numerical information about offers and counteroffers (e.g., “I propose 6–8–2”; numerical response mode), real life negotiations often involve affective and evaluative statements (e.g., “I didn’t like your last offer, but I would be happy to explore alternatives”; affective response mode). The present research explores the differential consequences of responding in affective as opposed to numerical terms. Specifically, we predicted and found that affective responses increase the impact of social and contextual cues on negotiation behavior. Three studies demonstrate that the impact of other’s toughness (Experiment 1), other’s respectability (Experiment 2), and other’s appearance (Experiment 3) on a negotiator’s demands and concessions is greater when the other provides affective rather than numerical feedback.     

Positive affect and decision frame in negotiation

This study examined decision frame (“gain” vs. “loss”) and negotiator affect (positive vs. control) in a simulated bilateral negotiation where negotiators dealt with a programmed opponent and made offers and counteroffers on three issues that differed in value. Direct comparisons between the gain and loss frame conditions, in the control-affect condition, revealed a replication of the standard frame effect: a loss frame produced fewer concessions than a gain frame. However, an interaction effect indicated that the frame effect reversed in the positive affect condition: under positive affect, a loss frame produced greater concessions than a gain frame. In addition, the data indicated a replication of earlier work showing that positive affect can lead to more integrative agreements in negotiation. The results suggest that positive affect can influence location of a reference point in evaluating prospective outcomes; one implication is that prospect theory can be useful for understanding the effects of affect in bilateral negotiation.     

Not All Threats are Created Equal: How Implicitness and Timing Affect the Effectiveness of Threats in Negotiations

The effectiveness of threats in negotiations was examined by exploring two factors likely to affect it: implicitness, or the extent to which the threat mentions what action the perpetrator would take if the target does not comply; and timing, or the time when the threat is stated. Participants were given a negotiation scenario that differed only by the nature of the threat made by their counterpart. The design was a 2 (implicit vs. explicit threat) × 2 (early vs. late threat) factorial design with a control condition (no threat). The study showed that early-implicit and late-explicit threats were both more likely to elicit concessions than early-explicit and late-implicit threats. The two more effective threats were also the ones that made the perpetrator seem less aggressive. Further, perceived credibility mediated the positive effect that late-explicit threats had over late-implicit threats in eliciting concessions. These results support the claim that whether making the threats sanction implicit is effective depends on its timing, as the nature of bargaining moves and perceptions varies over time (Pruitt 1981). They suggest that the way in which a threat is stated may dramatically influence its effect on the target.     

The MARS Approach in the Verbal and Holistic Evaluation of the Negotiation Template

The negotiation template, which defines a set of potential negotiation offers, is traditionally evaluated by means of the simple additive weighting method (SAW). However, some recent research reports on the potential problems and inconsistencies in using and interpreting SAW-based scores. Thus, in this paper we consider the issue of evaluating negotiation offers when the negotiator’s preferences are expressed verbally. We present a new approach called Measuring Attractiveness near Reference Situations (MARS), which combines the algorithms of two multiple criteria decision making methods: ZAPROS and MACBETH. Applying the elements of ZAPROS allows identifying a small set of reference alternatives that consists of the best resolution levels for all the negotiation issues but one. In pair-wise comparisons of these alternatives negotiators need to evaluate trade-offs only, which means deciding which concessions are better to be made. Using the elements of MACBETH allows determining the strong interval scale based on verbal judgments defined by negotiators at the beginning of the preference elicitation process. We study in detail the legitimacy of hybridizing ZAPROS and MACBETH that differ in their philosophies of decision support as well as discuss the drawbacks of these two MCDM methods and propose some alternative solutions that make this approach applicable to supporting negotiators in the evaluation of negotiation offers. Finally, we present an example in which we indicate the differences in the negotiation offers’ scoring process conducted by means of MARS and the traditional ZAPROS and MACBETH procedures.     

The Influence of Past Negotiations on Negotiation Counterpart Preferences

Choosing the right counterpart can have a significant impact on negotiation success. Unfortunately, little research has studied such negotiation counterpart decisions. Three studies examined the influence of past negotiations on preferences to negotiate again with a counterpart. Study 1 found that the more favorable a past negotiated agreement the stronger the preference to negotiate with the counterpart in the future. Moreover, this relation was mediated through liking of the counterpart. Study 2 manipulated the difficulty of achieving a favorable agreement in the negotiation and found a significant effect of this situational factor such that subsequent counterpart preferences were less favorable when the negotiation was difficult. Similar to Study 1, this effect was mediated through liking of the counterpart. Study 3 examined the possibility of debiasing negotiator preferences from the biasing influence of situational characteristics by providing relevant information about the negotiation situation. Replicating the results of Study 2, negotiation difficulty affected counterpart preferences before additional information was given or when irrelevant information was given. However, once negotiators received relevant information on the negotiation situation, the effect of negotiation difficulty disappeared. Theoretical and practical implications 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).     

The (Negligible) Benefit of Moving First: Efficiency and Equity in Principal-Agent Negotiations

Like the first-mover in an ultimatum game, the principal is a first-mover with foreknowledge of the agent’s “rational” best response function. The solution to the “principal’s problem” is to choose a contract that maximizes the principal’s expected profit given the agent’s marginal efficacy and marginal effort cost. However, this paper reports experiments that show that principals make large concessions toward an equal division outcome. As in ultimatum games, agents are at times willing to punish principals who are perceived as being overly acquisitive. Variations in agent effort cost and effectiveness that should (theoretically) produce qualitatively different game-theoretic equilibria have little impact on outcomes.     

Efficient Multi-Attribute Negotiation with Incomplete Information

Multi-attribute negotiation is an important mechanism for distributed decision makers to reach agreements in real-world situations. It allows the possibility of reaching “win-win” solutions for both parties, who trade off different attributes in a solution. Existing research on multi-attribute negotiations has mainly focused on the situations when negotiation parties have complete information about each other's preference. This paper presents a model with incomplete information, while considering Pareto-efficiency and computational efficiency. A non-biased mediator, who applies query learning to maintain near Pareto-efficiency without heavy computation, is adopted in the model. In addition, the mediating mechanism proposed in the model overcomes the difficulty of preference elicitation which usually arises in the preliminary step of a multi-attribute negotiation. Our model also reduces the negotiation complexity by decomposing the original n-dimensional negotiation space into a sequence of negotiation base lines. Agents can negotiate upon a base line with rather simple strategies. The experimental results show that near Pareto-efficient agreements can be reached effectively.     

The Relationship of Cognitive Effort,Information Acquisition Preferences and Risk to Simulated Auditor–Client Negotiation Outcomes

The auditor–client relationship is a legally-mandated relationship in which one party, the auditor, is hired and paid by the auditee (client) to inform third party stakeholders as to whether the client firm’s financial statements are presented in conformity with national financial accounting standards. When these statements do not meet the criteria for acceptable financial statements, a negotiation situation may arise in which the auditor is presumed to act in the best interests of shareholders and creditors who have no independent knowledge of the auditor’s findings. The client management may then feel forced to defend its numbers. The result is a negotiation between the auditor and client (e.g., Salterio in Account Financ 52:233–286, 2012; Brown and Wright in Account Horiz 22(1):91–109, 2008). This study examines cognitive factors and risk preference factors that may impact the negotiation both in the setting of each side’s negotiation position and on the outcomes of that negotiation using simulated auditor–client negotiations. Questionnaire and simulated auditor–client negotiations were used to generate the data, with MBA and MS in Accounting students playing the role of client CEOs and auditor partners. We further explore the use of a tool, Structural Equation Modeling, to test the data, in the process highlighting its usefulness in auditor–client negotiation research. We find that the cognitive characteristic of need for cognition is significantly and positively related to achievement of the negotiator’s desired income objectives and reported willingness to argue strongly for his/her position. Actively open-minded thinking, a second cognitive variable studied, was not significantly related to success in the negotiations, nor to a reported willingness to argue strongly for his/her position. Finally, we find that perceived aggressive tactics by the other party to the negotiation had a negative impact on the counterpart negotiator’s success in the negotiation, and satisfaction with it. As expected, risk assessment-related variables were not related to outcomes of interest.     

An Analytical Approach to Offer Generation in Concession-Based Negotiation Processes

We develop analytical models to assist negotiators in formulating offers in a concession-based negotiation process. Our approach is based on plausible requirements for offers formulated in terms of utility values for both the negotiator making the offer and the opponent receiving it. These requirements include value creation, reciprocity, and the fact that an offer actually leads to concessions. Trade-offs between their own and the opponent’s utilities can be formulated by negotiators and define a search path in the utility space. Solutions along this search path are then mapped back into the issue space to generate actual offers. We present and discuss several variants of optimization models to generate such offers and illustrate them with an numerical example.     

The negotiator’s power as enabler and cultural distance as inhibitor in the international alliance formation

We examined how the negotiator’s power, the explorative–exploitative purpose and cultural distance interact in the negotiation for an international business alliance formation. Our participant observation in some several events of negotiation suggests that the executive’s power plays an enabling role in the negotiation for alliance formation. However, cultural distance between the negotiating parties in the international business context hampers the success of the negotiation. In particular, person power supports the explorative alliance purpose. The explorative alliance embodies technical and behavioural uncertainty. On the other hand, position power supports the exploitative alliance purpose. The exploitative alliance purpose more aptly embodies behavioural uncertainty than technical uncertainty does.Cultural distance has a high negative influence on person power and the explorative alliance, and person power and the explorative alliance indicate high uncertainty. In comparison, cultural distance has a negative influence on position power and exploitative alliance, and position power and exploitative alliances indicate low uncertainty. In other words, cultural distance matters more in the person–explorative combination than it does in the position–exploitative combination. The main assumption is that cultural distance has adverse effects on both power and tasks in the negotiation. However, the notions of power and purpose do not influence the effect of national cultural differences.     

An Experimental Investigation of Virtual Negotiations with Dynamic Plots

Advanced information and communications technologies provide the basis for virtual negotiations where competitors continuously alter their assignments in real-time in response to market changes. Dynamic plots, which depict the competitors' possible profits and hints for how to improve them, provide a way to support these types of negotiation settings. This research reports on an experimental assessment of dynamic plots for visual interactive negotiations. Dynamic plots are compared to an alternative dynamic method of real-time negotiation support using selected conflict situations to test five hypotheses. The results of the laboratory assessment provide evidence for the hypotheses that dynamic plots stimulate negotiations, provide effective support to reach efficient, system optimal, and equitable solutions, and are well received as negotiation tools in real-time settings.     

Dancing on the Slippery Slope: The Effects of Appropriate Versus Inappropriate Competitive Tactics on Negotiation Process and Outcome

As negotiation is critical to all forms of organizational decision-making, researchers have shown an interest in understanding how the flow of information (valid and otherwise) influences this process. Often, competitive, questionable, and unethical tactics have been treated as interchangeable in these studies, despite presumed differences in appropriateness. The purpose of this study was to examine the similarities and differences in negotiators’ use and efficacy of appropriate competitive tactics (e.g., exaggerated offers) versus inappropriate competitive tactics (e.g., factual misrepresentations), primarily through a negotiation simulation. The study found that although these two categories of tactics were correlated in terms of overall use, appropriate competitive behaviors were used more frequently, especially early in negotiations, and these behaviors often resulted in comparable responses from counterparts. While ultimately increasing the likelihood of a negotiation impasse, the use of appropriate competitive tactics improved an individual’s substantive outcome where agreements could be reached. Inappropriate competitive tactics were likely to increase in number the sooner they were first employed in negotiations, with a response of inappropriate competitive tactics to the first use of competitive tactics increasing the likelihood of subsequent use of inappropriate tactics. The implications of these and other findings for both practitioners and future research are discussed.     

A method for examining learning in negotiation

The impact of feedback on interpersonal learning in negotiation was examined. An interactive computer program was developed to isolate the effect of individual judgment on performance. Subjects negotiated three times with a computerized opponent whom they were led to believe was another subject. Some subjects received a complete diagnosis of their opponents' interests following each negotiation (full feedback); others only learned about their opponents' payoffs (outcome feedback); some did not receive any information about the opponent (control). The prediction was that subjects who received a complete diagnosis would make more accurate judgments about their opponents' interests and reach more integrative agreements in subsequent negotiation situations. The results provided weak support for the model. Two indices of performance were studied: negotiators' ability to recognize compatible issues and logrolling, or the ability to make mutually beneficial tradeoffs among issues. The pattern of findings was dramatically different for the two performance measures: Whereas logrolling improved as negotiators gained experience, recognition of compatible issues worsened over trials. The degradation of performance for compatible issues was curbed for negotiators who were provided with full feedback. The feedback did not affect logrolling performance.The research reported in this article was supported by a grant from the National Science Foundation #SES89211926.     

Mexico and the United States: Common border,common negotiating orientations

With a growing cadre of people conducting business across the U.S.–Mexico border, there is a need for information about the negotiation orientations they are likely to encounter. While information on negotiating orientations is available, it is often anecdotal, stereotyped, and contradictory. Empirical work that systematically compares Mexico and the United States across a range of negotiating dimensions is scarce. We have clarified, refined, and operationalized 12 negotiation dimensions in a comprehensive conceptual framework proposed over 20 years ago by Weiss and Stripp (1985). Our findings suggest that U.S. and Mexican negotiators may have more in common than they think and that negotiation orientations in both countries may run counter to conventional wisdom. © 2008 Wiley Periodicals, Inc.     

Two-Party Negotiation Modeling: An Integrated Fuzzy Logic Approach

Game theoretic models attempted to predict unique equilibrium outcomes of negotiations with limited success. The imprecise character of negotiation is often altered to fit the game theorist's exacting approach. Alternative models deviated from the formal game theoretic approach and attempted to accommodate concepts such as negotiator power and time pressure. In this paper, we introduce a model which uses a fuzzy logic approach to deal with the imprecision in the negotiation process and to integrate several negotiation theories. The new model is used to simulate multiple-issue, two-party negotiations and results are consistent with established negotiation theories.