The Advent of the AI Negotiator: Negotiation Dynamics in the Age of Smart Algorithms

26 Pages Posted: 15 May 2024

See all articles by Horst Eidenmueller

Horst Eidenmueller

University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Date Written: May 15, 2024

Abstract

Artificial Intelligence (AI) applications are increasingly used in negotiations. In this essay, I investigate the impact of such applications on negotiation dynamics. A key variable is information. Smart algorithms will drastically reduce information and transaction costs, improve the efficiency of negotiation processes, and identify optimal value creation options. The expected net welfare benefit for negotiators and societies at large is huge. At the same time, asymmetric information will assist the algorithmic negotiator, allowing them to claim the biggest share of the pie. The greatest beneficiary of this information power play could be BigTech and big businesses more generally. These negotiators will increasingly deploy specialized negotiation algorithms at scale, exploiting information asymmetries and executing value claiming tactics with precision. In contrast, smaller businesses and consumers will likely have to settle for generic tools like the free version of ChatGPT. However, who will ultimately be the big winners in AI-powered negotiations depends crucially on the laws that regulate the market for AI applications.

Keywords: Negotiations, Negotiation Dynamics, Artificial Intelligence, Algorithms, Algorithmic Negotiator, Information, Information Asymmetries, BigTech

JEL Classification: K12, K2, K41, M1, M2

Suggested Citation

Eidenmueller, Horst G. M., The Advent of the AI Negotiator: Negotiation Dynamics in the Age of Smart Algorithms (May 15, 2024). Available at SSRN: https://ssrn.com/abstract=4828339 or http://dx.doi.org/10.2139/ssrn.4828339

Horst G. M. Eidenmueller (Contact Author)

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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