Indirect Dynamic Negotiation in the Nash Demand Game

Abstract

The paper addresses a problem of sequential bilateral bargaining with incomplete information. We proposed a decision model that helps agents to successfully bargain by performing indirect negotiation and learning the opponent’s model. Methodologically the paper casts heuristically-motivated bargaining of a self-interested independent player into a framework of Bayesian learning and Markov decision processes. The special form of the reward implicitly motivates the players to negotiate indirectly, via closed-loop interaction. We illustrate the approach by applying our model to the Nash demand game, which is an abstract model of bargaining. The results indicate that the established negotiation: i) leads to coordinating players’ actions; ii) results in maximising success rate of the game and iii) brings more individual profit to the players.