Negotiation Decision Support Systems: Analysing Negotiations under the Conditions of Risk

Nipun Agarwal

doi:10.15209/jbsge.v4i3.163

Abstract

Negotiation Theory is a research area with emphasis from three different research streams being game theory, psychology and negotiation analysis. Recently, negotiation theory research has moved towards the combination of game theory and psychology negotiation theory models that could be called Integrated Negotiation Theory (INT). As, negotiations are often impacted by external factors, there is risk associated with achieving the expected outcomes. Prospect theory and Negotiation theory are combined in this paper to incorporate the risk associated within negotiations. Negotiation Decision Support Systems (NDSS) is an information technology tool using negotiation theory and artificial intelligence to assist disputants in a negotiation to obtain better negotiated outcomes than they can obtain otherwise. Due primarily to the limitations of bounded rationality and differing mental or physical state of the disputant. In the past, NDSS have primarily used game theory within their negotiation and decision making framework to assist disputants resolve negotiations, as game theory is easier to incorporate. This paper shows how INT and Risk Factors (Prospect Theory) can be incorporated into an NDSS to improve negotiation decision making.

Highlights

Negotiation is used in every interaction we have with another human being in any instance, for example, where we purchase goods or services from someone, help a friend move a table from one room to another, help a stranger on the street or discuss a topic of mutual interest
The current and past research related to Negotiation Decision Support Systems (NDSS), game theoretic negotiation theory, negotiation analysis, psychological negotiation theory and prospect theory are reviewed
Realising that negotiation theory research is moving towards conjoined game theoretic psychological negotiation theory models, called Integrated Negotiation Theory (INT) in this paper

Summary

Introduction

Negotiation is used in every interaction we have with another human being in any instance, for example, where we purchase goods or services from someone, help a friend move a table from one room to another, help a stranger on the street or discuss a topic of mutual interest. We have gone through the substantial amount of research that has been undertaken by game theoretic and psychology researchers (Bazerman, Magoliozzi and Neale 1985; Kim, Bazerman, and Neale 1990; Weingart, Thompson, Bazerman, and Carroll 1990; Sondak and Bazerman 1991; Bazerman 2005), which discusses important negotiation issues some of which are advantages of integrative and distributive negotiations, BATNA, game theoretical models from Shelling (1960), Nash (1951), Harsyani (1967, 1968), bargaining theory, psychological factors that affect negotiations like 3D view page of negotiations (Sebenius and Lax 2002), fair division of outcomes (Brams 1990; Brams and Taylor 1996), behavioral decision theory and negotiation analysis (Raiffa, Richardson and Metcalfe 2002), dynamic valuations in negotiations (Bendersky and Curhan 2003), type of negotiation (Berger, Kern and Thompson 2003), negotiating preferences (Bendersky and Curhan 2003), perceptual gaps (Cronin, Weingart, Cagan and Vogel 2002) and subjective reasoning in dynamic games (Feinberg 2002) These two groups of theories (game theoretic and psychological) provide a basis for the development of an integrated game theoretic psychological negotiation theory (integrated negotiation theory or INT) that is expected to provide prescriptive recommendations to improve negotiated outcomes. Kahneman and Tversky (1986) provide evidence that there is variance in preferences when options are framed differently

Source Dependence

Conclusions