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"Electronic negotiation is the attempt to automate the negotiation process." (Segev and Beam, 6)

With the rapid growth of the Internet and the latest popularity of Electronic Commerce, the subject of negotiations has arisen. Negotiation in business is clearly one of the most important phases. As of yet, full automation has not been implemented in E-commerce. In face, "the negotiation part is still mainly done by hand"(1, p.3). The main reason why the negotiation process has not been fully automated is due to the fact that it is very complex in nature. There are many barriers that have been defined by researchers, namely the ontology and strategy problem. The ontology deals with the difficulty of having "vocabulary that can describe objects in a way that is meaningful and non-ambiguous to a software agent"(6). The strategy issue deals with the difficult task of programming a good strategy within the software agent.

In this paper, Inspire (an NSS) and its tools will be discussed and an evaluation will be made on whether it has potential use for E-commerce or not. "A NSS is a software program which is specifically geared towards helping human negotiators make better decisions and negotiate more productively, and is a step towards automated negotiation (1, p.5)". It is thus important to note that Inspire was not an attempt to fully automate the negotiation process, but rather to support it.

There are three phases in the negotiation process: Pre-Negotiation, Negotiation (or bargaining phase where offers and counter-offers are exchanged), and Post-Settlement.

The pre-negotiation phase is where "one prepares for the negotiation"(4). Inspire supports several activities of the pre-negotiation phase:

1. Problem Definition: the user is given a case to evaluate; however the issues (price, return policy, etc) are already pre-defined. In a real negotiation this would have to be defined by the users.
2. Preference Elicitation
3. Evaluation of Alternative Packages.

The last two activities are conducted by having the users rate the issues, options, and packages on a numerical scale.

It is with these ratings that the last two phases of the negotiation process are supported by the NSS. It is a common belief that "how you negotiate (and how you prepare to negotiate) can make an enormous difference, whatever the relative strengths of each party (3, p.3)". It is thus important for the user to rate his preferences accurately so that the system can help the user come to the best agreement. The usefulness of the ratings is explained in the next 2 phases.

The negotiation phase involves the exchange of messages, offers and counter-offers. During this phase, Inspire provides the users with many tools. For example, a package is selected and sent to the counter-part along with a message. On the receiving end, the counter-part is alerted via E-mail that an offer was made and can read the message written by the user. The counter-part then proceeds to the site, to send his own offer. This can go on for a long time. However, throughout the exchange of messages, a historical graph of all offers made by the user and counter-part is plotted but only from the one user's perspective and according to that user's preference ratings. This graphical representation gives the user a better view as to where he stands within the negotiations as per the ratings he specified. At anytime during the negotiation phase, the users have the option of changing their ratings. This is used to support the users if they desire to change their strategy midway, if they made a mistake or what not. The ratings are not engraved in stone until the users reach an agreement and may proceed to the post-settlement phase.

Inspire's post-settlement phase is only summoned if the agreement was an inefficient one. It is common for "people to come to much less than optimal outcomes and as a result joint gains are left on the table that could have been exploited.(3, p.14)" With the help of the ratings, Inspire is able to alert the users, which packages could have been selected, but left undebated, that leaves one user better off, but none worst off. The point is that the packages that Inspire suggests will not make any user worse off than the compromise already agreed upon.

The tools imbedded within Inspire have great potential for use in E-commerce. For instance, in the case of a buyer and seller, the messaging system allows them to communicate and exchange important information. It allows for them to go about their business without having to fix a date on where and when their negotiations will take place. This is something that takes a lot of time in traditional business negotiations. A system like Inspire that is permanently available (so long as the hosting website permits) on the web is a great tool for the reasons of portability, ease of use and as well as ease of accessibility.

Secondly, in many negotiations, the use of third parties (arbitrator, facilitators, mediators) is widely recommended for the simple reason that people lack trust and will not divulge to the other counterpart information which may lead to them finding out their BATNA. Sometimes, this can result in unresolved situations, where a very profitable agreement could have been reached otherwise. This is especially important in integrative bargaining where there is a "premise that solutions can be found…" where there is the "creation of value, the focus on interests and not positions, openness and exchange of relevant information"(2, p.2). These are all common characteristics of E-commerce negotiations.

As well, many business negotiations have potential to be integrative, and therefore to reach an optimal solution, a third party should be used. Inspire acts as a third party, by concealing private information (preferences, ratings) of both users, and by helping them come to a joint outcome. This is a very important tool in business negotiations because hiring an outsider that is unbiased and that keeps the preferences secret in the interest of both sides, can be costly and time consuming (arranging that all 3 parties be available at the same time and paying the third party for their services).

The history kept on the negotiations that have taken place up to date is great for business negotiations as well. This ensures that neither party attempts to take back something they had previously agreed upon. How many times have we heard about lawsuits where one party promised the second to supply a certain good or service, but then decided against it, and the other party's business suffered because of it? This would make sure that the parties involved in the negotiations thought twice before making promises that they may not keep.

A successful negotiation depends upon "concentrating on improving your BATNA and perhaps changing theirs"(3, p.4). A history and graphical representation of offers and counteroffers can help estimate the counterparts BATNA, or at least an approximation of what they stand firm upon and what they are less interested in. With this information, the other party can react, or modify their strategy accordingly.

Thus far, E-commerce has consisted of the selling of products and services through the sharing and accessibility of information. It is the shared opinion of many Inspire users that Inspire is "best-suited for simple issues."(5) I agree with this statement only because it is already difficult to automate the negotiation process and that having a complex negotiation to conduct on-line would be very frustrating if the tools that are used to support the negotiations are not flexible enough. I feel that Inspire itself may not be flexible enough. For example, what if a new issue arises during the negotiations? Inspire does not allow for the users to add a new issue midway.

However, due to the present nature of E-commerce, the tools found in Inspire could definitely be used for on-line business negotiations. This is simply because E-commerce transactions and the negotiations that they involve presently, are not that complex and fairly simple to negotiate upon. The difficulty for E-commerce transactions is that many transactions are done by parties that do not reside near each other. A web-based NSS, with the tools from Inspire, takes care of the distance between both parties.

References

(1) Beam, C., Segev, A., Automated Negotiations: A Survey of the State of the Art, 1997, http://www.haas.berkeley.edu/~citm/nego-proj.html/

(2) G.E. Kersten, S.J. Noronha and J. Teich, Are all E-Commerce Negotiations Auctions?, 1999, http://www.business.carleton.ca/interneg/research/papers/

(3) Hall, L., Negotiation: Strategies for Mutual Gain, Sage Publications, 1993.

(4) Inspire FAQ, http://www.business.carleton.ca/inspire/doc/faq.html

(5) Liao, A., Fonstad, N.O., Advantages and Disadvantages of Negotiating over the Internet, 1997, http://interneg.carleton.ca/interneg/training/inspire/reports/mit97/

(6) Segev, A., Beam, C., Auctions and Bargaining in Electronic Commerce, http://www.haas.berkeley.edu/~citm/nego-proj.html/