Protocols for Automated Negotiations

Lorrie Faith Cranor
AT&T Labs-Research
lorrie@research.att.com

Paul Resnick
The University of Michigan
presnick@umich.edu

Abstract:

Much of the effort in electronic commerce has focused on consummation
of transactions, through payment systems that have various desirable
properties. Another interesting avenue for research is the negotiation
of price and other terms of transactions. Economic theory has
investigated the optimal behavior of rational agents in auction and
bargaining situations. We apply that theory to the design of automated
negotiation protocols. In particular, in what situations are
restricted protocols sufficient to achieve all the same outcomes that
a more complete, flexible protocol could achieve?

In mechanism design situations, the Revelation Principle suggests that
communication protocols need only support direct mechanisms in which
players report their types to a central broker that computes an outcome.
This paper considers the analogous problem for bargaining situations,
with direct negotiations between two parties. The most general
bargaining protocol would permit an unlimited number of rounds of
offers and counter-offers, with offers being either commitments or
cheap talk. We will identify the properties of settings in which
limited bargaining protocols are sufficient to achieve all the
equilibrium outcomes. We will also suggest real-world situations that
have these properties. The paper is motivated by the problem of
designing a protocol for a Web browser to negotiate with a Web server
about what information will be revealed to the web site and how that
information will be used. This protocol will be part of P3, the
Platform for Privacy Preferences, currently being developed by the
World Wide Web Consortium.