Evolutionary algorithm approach to bilateral negotiations

Abstract

The Internet is quickly changing the way business-to-consumer and business-to-business commerce is conducted. The technology has created an opportunity to get beyond single-issue negotiation by determining sellers’ and buyers’ preferences across multiple issues, thereby creating possible joint gains for all parties. We develop simple multiple issue algorithms and heuristics that could be used in electronic auctions and electronic markets. In this study, we show how a genetic algorithm based technique, coupled with a simple heuristic can achieve good results in business negotiations. Outcome of the negotiations are evaluated on two dimensions: joint utility and number of exchanges of offers to reach a deal. The results are promising and indicate possible use of such approaches in actual electronic commerce systems.