pre-negotiation phase protocol for electronic negotiation support

An original non-revised version © by authors

PRE-NEGOTIATION PHASE PROTOCOL FOR ELECTRONIC NEGOTIATION SUPPORT1 Tomasz Wachowicza and Paweł Wieszałab The Karol Adamiecki University of Economics in Katowice ul. Bogucicka 14, 40-227 Katowice, Poland a [email protected] b [email protected]

Abstract: In the paper we discuss the issue of software support for the pre-negotiation phase. Prenegotiation phase requires from negotiators many task to perform in order to prepare to the actual negotiation and, among others, the analysis of the consequences of the potential alternatives of agreement. We propose to structure negotiations according to PrOACT method, which allows to define the negotiation problem and the initial negotiation space basing on negotiators’ aspiration and reservation levels. Additionally the notion of intermediate solutions is introduced to prepare an alternative options for all negotiation issues. Then the PROMETHEE algorithm is applied to create a ranking of negotiation offers. The algorithm is modified, which allows to make a within-issue analysis instead of full offers comparison. It allows to shorten a calculation process. All the algorithms and procedures comprise the pre-negotiation protocol that can be implied in an electronic negotiation system the usage of which makes the pre-negotiation phase more fluent and transparent. Keywords: negotiation support, negotiation analysis, multiple criteria decision making, preference elicitation, PROMETHEE.

1.

INTRODUCTION

Negotiation is a very complex process of exchanging messages, offers and concession making in order to constitute a compromise that satisfies all the involved parties. It requires many different skills and abilities both of behavioral and formal nature like: supportive communication, conflict management, decision making or multi-objective analysis. The negotiation consists of number of stages that require different problems to solve and tasks to perform. Usually the three main phases of negotiation can be distinguished: the pre-negotiation phase (negotiation preparation), the actual conduct of negotiation and the post-negotiation phase including implementation of results or renegotiation [4]. The activities undertaken in all the stages are very important, however, many researcher emphasize the role of the pre-negotiation phase [8]. The solid negotiation preparation results then in correct selection of negotiation strategies, adequate negotiator attitude, good decisions made, wise concessions and the negotiation atmosphere. Therefore while supporting negotiation process it is very important to construct a adequate model of pre-negotiation procedure. The continuous development of information technology and web services results in many software solutions, e.g. electronic negotiation systems, that are able to support negotiation instead of the human facilitators. Negotiation support systems have also communication and coordination facilities that allow to create an e-negotiation table [6] and conduct negotiations using only the electronic platform instead of the traditional meetings. In the age of the global economy it gives the opportunity to overcome the limitations of time and space and find the business partner wherever in the World. Many such systems exist, used both for the training, research and solving the real world negotiation problems (commercial tools), like INSPIRE [7], Neggoist [10], FamillyWinner [1]. To 1

This research was partially financed with the funds of Polish Ministry of Higher Education and Science for the scientific project number N N111 234936 realized in years 2009-2012.

An original non-revised version © by authors support the pre-negotiation activities most of these systems use the utility based scoring mechanisms that require the negotiation problem to be highly structured. Moreover they require tiring and time-consuming interaction with negotiators in order to evaluate each single option within each negotiation issue by simply assigning them the utility scores (no calculations or comparisons are required within the procedure). To build the scoring system that reflects the actual negotiator’s structure of preferences then the basic knowledge of the decision making and ratio scale interpretation is required. In this paper we propose a new negotiation protocol for pre-negotiation phase that can be automatically realized by means of the electronic negotiation system for supporting bilateral negotiation. The protocol comprises the list of task that must be conducted by parties in order to structure the negotiation problem appropriately and construct the scoring system for the negotiation offers that could be exchanged in the next negotiation stage. We will apply the straightforward method of multiple criteria decision making called PrOACT [5] to structure the problem and then the PROMETHEE method [2], the modification of which we propose for the calculation reasons, for the offers evaluation. All the algorithms are programmed as a web based negotiation support system the work of which we illustrate with a simple example. 2.

STRUCTURING THE NEGOTIATION PROBLEM FOR PRE-NEGOTIATION PROTOCOL

The pre-negotiation phase consists of many different tasks. They concern preparing the negotiation agenda, all the documents required, analyzing the strengths and weaknesses both of the negotiator and its counterparts, but also identifying the negotiation problem and creating the alternatives for the negotiation agreement [11]. In this paper we will focus on the two last activities that allow to realize the evaluation function [6] of the electronic negotiation system. In building the pre-negotiation protocol we will follow the first four steps of the PrOACT [5] method, which gives the algorithm for solving a classic multiple criteria decision making problem2. These steps are: 1. Defining the decision problem. 2. Identifying the objectives of both the parties. 3. Creating the alternatives, 4. Identifying the alternatives consequences. The fifth step of PrOACT requires the implementation of the trade-off method for selecting the most satisfying alternative, which does not fit the problem we consider here and will be omitted in our pre-negotiation protocol. Deriving from the above PrOACT algorithm we will start with identifying the negotiation problem by defining the negotiation issues under consideration. Therefore the electronic negotiation system needs to provide to the parties the communication platform (see Section 4) for exchanging the messages in order to constitute the set I of the negotiation issues. The issues are defined by a short names (e.g. cost, time of delivery) and can be both of the quantitative and qualitative nature. The next steps of the PrOACT requires creating of the negotiation offers and their consequences. We define then a particular offer (alternative) by specifying the resolution levels (options) for each negotiation issue, which can be denoted as (1) a = [x1 , x 2 ,..., x I ]

2

The PrOACT method has already been modified and used for structuring the negotiation problem in the NegoCalc negotiation support system [12].

An original non-revised version © by authors where xi is an option selected from the set X i , of all predefined options for issue i . The classic negotiation analysis approach based on the cardinal utility theory (see [9]) require negotiators to define a priori the finite number of option values for each negotiation issue, and then score them in terms of utility. It can be troublesome, especially if we consider the quantitative issues (e.g. price) the values of which can change of very small intervals and therefore produce the huge sets of resolution levels the evaluation of which could be very tiring or even impossible (taking into account e.g. the time constraints of negotiations). Therefore we propose an alternative solution for defining the negotiation space by examining the negotiators’ aspiration and reservation levels. The electronic negotiation system asks both the negotiators ( α and β ) to declare the most preferable resolution levels (they would like to achieve) and the least preferable ones (they would hardly accept) for each negotiation issue. These values comprise the initial set of options for this issue:

{

α

α

β

β

}

X iinit = ximost , xileast , ximost , xileast . (2) Since the aspiration and reservation levels of the negotiators are confidential the initial sets of options X iinit cannot be used directly to define the set of negotiation alternatives. We

propose then to build the final sets of options X i by adding to the initial sets of options X iinit some other resolution levels (the set of intermediate levels X iint er ). If the issue is quantitative the intermediate levels can be simply calculated by interpolating between the subsequent elements of the set X iinit . To make the pre-negotiation analysis fluent the operations of identifying the set X iint er should be realized automatically by the analytic engine of the electronic negotiation system with the initial support of the negotiator. She or he is asked to declare the indifference threshold qi , required primarily for the PROMETHEE algorithm (see Section 3), which reflects the maximal distance between two options for which the negotiator perceives these two options to be equally preferable. We will identify then the α

α

α

intermediate options moving from xileast to ximost with the step of qi , which will result in fact in determining the salient options [7] for negotiator α (a similar analysis should be conducted for the negotiator β ). It is also important to include into the set X iint er some

(

α

β

)

(

α

β

)

and lower then min xileast , ximost to hide the values greater then max ximost , xileast aspiration and reservation levels of both the negotiators. If the issue is described qualitatively the negotiators should be asked for indicating the other resolution levels they mean to consider during the negotiation process. Moreover the resolution levels need to be ordered from the most preferable to the least preferable one, to allow the electronic negotiation system conduct the calculation procedures (see Section 3, step number 2 of the algorithm). Having defined the sets of intermediate levels we can create the final sets of options for each issue i ∈ I (3) X i = X iinit ∪ X iint er . Basing on the sets of options X i the system determines the set of feasible negotiation alternatives A by finding all the possible combinations of the options for all negotiation issues. We will consider the set A to be a preliminary set of negotiation alternatives that negotiators can modify later within the pre-negotiation phase. If they consider the negotiation space found by software system to be too narrow they can add or modify the options within each declared issue. The definition of the final set of alternatives makes the first part of the pre-negotiation phase competed. The set A is used then in the next stage of

An original non-revised version © by authors protocol to create the scoring system for the potential offers by means of PROMETHEE method and according to the negotiators’ basic preference information. 3.

ANALYZING THE NEGOTIATION OFFERS WITH PROMETHEE METHOD

We have decided to implement the PROMETHEE [2] in analyzing negotiation offers since it does not require subjective assigning the scoring points individually to each option within an each issue. Such assignments can be introduce in negotiations problems with relatively small negotiation space, but in large problems they can be very tiring and troublesome, especially for the negotiators without a basic mathematical knowledge of the multiple criteria decision making. Introducing PROMETHEE in offers evaluation makes the preference elicitation much fluent since the negotiators need only to declare the weights (importance) of the negotiation issues and then only few other pieces of information like the preference or indifference thresholds. The original PROMETHEE II algorithm operates on the finite set A of alternatives a n , n = 1,2,..., N that are evaluated in terms of I different criteria. The function f i (a n ) returns the value of criterion i for alternative a n . Comparing two alternatives a m and a n in terms of criterion i we determine the difference f i (a m ) − f i ( a n ) , denoted as δ i ( a m , a n ) , which is used in the further calculation process for building the ranking of alternatives. In negotiation problem the set A is very specific since it consists of the alternatives being combinations of all the options for all negotiation issues. Therefore for some groups of alternatives consisted of the same values of xi the difference δ i will be identical. We can thus shorten our PROMETHEE calculations for negotiation problem by modifying first two steps of the algorithm. Instead of comparing the alternatives we will compare the option values for each negotiation issue separately. The modified algorithm is as follow: 1. We compare each pair of options for each negotiation issue and determine the difference δ i ( xis , xit ) , where xis , xit ∈ X i and i = 1,..., I ; s, t = 1,..., X i ; s ≠ t .

For the qualitative issues we assume δ i to be a difference in the ranking positions between the options under consideration. 2. We determine the values of the preference functions Pi ( xis , xit ) , where i = 1,..., I ; s, t = 1,..., X i ; s ≠ t . The preference function assigns to each difference δ i the

value from the range [0;1] , which reflects the negotiator’s strength of preference. The value of 1 corresponds to the strong preference, while the value of 0 to the lack of preference.

While considering the qualitative issues we recommend to apply the preference function in the following form: 0 δ i ≤ 0 . (4) P(δ i ) =  1 δ i > 0 It allows to affirm the preference in case the options differ with no examining the scale of difference, which could be hard to determine taking into account a verbal character of this issue. For the quantitative issues the five other preference functions can be introduced (see [2]). We propose to apply for instance the following function

An original non-revised version © by authors  0  δ − q P(δ i ) =  p−q  1

δ ≤q q p

In the above function the rules of determining the strength of the preference are straightforward and easy to explain to negotiators and require only the declaration of the indifference threshold q and the preference threshold p . However using our electronic negotiation system for pre-negotiation support (Section 4) the user can also choose other preference functions. 3. For each pair of offers we determine the overall preference indexes Π (a m , a n ) = ∑ wi Pi (xi (a m ), xi ( a n ) ) ,

(6)

i

Π (a n , a m ) = ∑ wi Pi (xi (a n ), xi (a m ) ) ,

(7)

i

where xi ( a m ) and xi (a n ) denote in sequence the values of option i for negoitation offers a m and a n . The next three steps of of the algorithm are the steps of the original PROMETHEE method and require: 4. Identification of the leaving and entering flow for each negotiation offer following the formulas: 1 N (8) Φ + (a m ) = ∑ Π(am , an ) , N − 1 n =1 m ≠n

Φ − (a m ) =

1 N ∑ Π(an , am ) . N − 1 n =1

(9)

m≠n

5. Determination of the preference net flow for each negotiation offer according to the formula: Φ (a m ) = Φ + (a m ) − Φ − (a m ) (10) 6. Building the ranking of the offers according to decreasing value of preference net flow Φ . Having completed the above algorithm of modified PROMETHEE method we obtain the scoring system of negotiation offers and completed the second stage of the prenegotiation protocol. The list of selected offers can be presented then to the negotiator including the aspiration and reservation offers and some other offers better then the aspiration one, some consisted of the intermediate options and some worse then the reservation one. Negotiator can analyze the list of offers and examine the consequences of the preference and indifference thresholds declared at the beginning of the pre-negotiation phase. She or he can freely change the thresholds or add some options and, after the scoring system recalculation, observe the changes in the offers ranking. The negotiator can also plan the concession path by analyzing the possible trade-offs between the issues. It can appear that concessions made in one issue (required by the counterpart) may be easily compensated by the slight improve for another issue and do not need to result in the moving down in the ranking levels.

An original non-revised version © by authors While scoring the negotiation space with PROMETHEE we need to be aware of one important drawback of this method, which is a rank reversal problem [3]. It makes it very important to identify the most accurate negotiation space before starting the preference elicitation procedure and going to the actual negotiation phase. Adding or removing the options is possible and do not involve negotiator in the recalculation of the offers scoring system, however it can change the final ranking of the negotiation offers. That is because the PROMETHEE algorithm bases on the pair-wise comparison of the offers that comprises of different options. Adding (removing) options results in adding (removing) offers from the set A , which will naturally influence the entering and leaving flows used for building the offers ranking. The simple example of conducting prenegotiation phase according to the negotiation protocol proposed in Section 3 and 4 is presented in the next section of this paper. 4.

EXAMPLE

Let us consider a simple example of business negotiation. The electronic negotiation system asks both the negotiators to describe the negotiation problem by defining the negotiation issues (Fig 1). The form includes issue name, type, values and description. When negotiator select the type (qualitative or quantitative) the system automatically activate appropriate textbox’s to define the values. For each negotiation issue the negotiator needs to declare the most preferable resolution level and the least preferable one (aspiration and reservation levels). Additionally for qualitative issues she or he needs to give other intermediate resolution levels. For quantitative issues the indifference threshold is required for building the list of salient options. In our example the first negotiator defines the problem by means of two issues: price and time of delivery in days (Fig 1). The second negotiator agree on those two issues and add one more: type of payment (Fig 2).

Figure 1. The definition of the negotiation issues


Figure 2. Agreeing for the negotiation issues proposed by the counterpart

Basing on the defined values and the indifference thresholds the system determines the negotiation space by specifying all salient options for both the negotiators (Fig 3). Then negotiators need to establish a preference function and its parameters for each negotiation issue (Fig 4). All information about PROMETHEE method, interpretation of parameters and different types of preference functions are available in documentation of the system.

Figure 3. Specification of the negotiation space


Figure 4. Defining the negotiator’s preferences

The system automatically calculates value of preference for all alternatives. In our case we have 5x5x4 = 100 different alternatives. To validate negotiators preferences, some examples of their preference are shown (Fig 5). If negotiator wants to redefine the negotiation space by adding or removing options and issues she or he can now move back to the first step of the pre-negotiation phase and introduce the changes. The system will recalculate the offers ranking according to the new problem and/or new preference indexes. On the other hand the preference information and the offers ranking is saved on the system server and can be used in the next phase of the actual negotiation for comparing and analyzing the offers.

Figure 5. The ranking of the negotiation offers

An original non-revised version © by authors Analyzing the list of the negotiation offers negotiators can prepare for the subsequent phase of the actual negotiation conduct. She or he realizes the tradeoffs that could be made within different pairs of issues. If her/his counterpart requires making concession in terms of a selected issue, the negotiator can find another issue she/he could compensate the losses in the former one. For instance, the negotiator, who has the ranking of offers as shown in Fig 5., proposes a compromise like {Price: 500000; Delivery time: 5; Payment type: Deferred payment – 30 days after date of transport}, but he counterpart requires the further concessions in the price. Looking at the ranking the negotiator knows she/he can pay even 70000 more for the contract, but will require the 45 days of delay in payment, which guarantee her/him the same level of satisfaction from this contract (these two offers are at the same ranking level constructed according to the negotiator’s preferences). 5.

SUMMARY

Deriving from PrOACT mechanism we have proposed a pre-negotiation phase protocol as a procedure requiring both mutual and individual activities of both the negotiators. The procedure starts with the mutual discussion over the negotiation issues and after the agreement it requires of negotiators the declaration of their aspirations and reservation levels. Then the analytic engine builds the sets of the options for negotiation issues that are used to build the preliminary set of the negotiation offers. The set is then presented to the negotiators and can be modified according to their individual requirements. Next the offers are evaluated by means of modified PROMETHEE method, which operates on the options instead on the alternatives within the first three steps of the algorithm. The prototype of the electronic negotiation system was also presented to show that the protocol we had proposed can be easily supported by means of a software tool. The major advantage of the protocol we proposed is that, as oppose to the utility based scoring systems, it allows to avoid the tiring preference elicitation procedures that require the multitude of the utility assignments to the negotiation options and issues. It also does not force negotiators to predefine precisely the negotiation space by themselves. The system derives form their aspiration and reservation levels and the indifference thresholds assigned to each issue to propose the list of salient options. Moreover, it does not involve negotiators in another preference elicitation process if they decided to change the initial set of alternatives proposed by supporting software system. Since they defined the preference and indifference thresholds at the beginning of the pre-negotiation phase, the system automatically determines the new ranking for the extended set of negotiation offers. There is one problem we found and it concerns evaluating the qualitative issues. Since we are not able to automatically detect the differences between the verbal descriptions of the options the negotiators are asked to find the intermediate levels and declare the order of the options within this issue. The detailed study of the qualitative nature of the issues needs to be conducted to find some alternatives for atomization of the above and we will focus on it in our further research. We will also continue the development of the electronic negotiation system by adding the other features like the communication unit for exchanging offers and tracking the negotiation process or introducing the arbitration and mediation procedures to make the software system act more proactively.

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