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Online Dispute Resolution and Bargaining

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  • Yannick Gabuthy

Abstract

Automated negotiation process seems to be a powerful mechanism to resolve disputes arising from Internet-based transactions. Automated negotiation is an online blind-bidding process in which an automated algorithm evaluates bids from the parties and settles the case if the offers are within a prescribed range.\ Following the arguments of the dispute resolution professionals, the main advantage of this procedure is to promote ''natural'' agreements by restoring the parties' right to negotiate on their own, without the presence of a third party in the shadow of negotiations. Our purpose is to investigate this issue by modelling the automated negotiation process as a two-person bargaining game under incomplete information. A first result states that, given incomplete information, not all mutually beneficial agreements can be attained via the procedure. Furthermore, the settlement rule has a drastic effect on the players' strategies, which induce that the automated negotiation process does not significantly increase the likelihood of a settlement. The ability of the procedure to generate efficiency is only due to the costs imposed on parties if a disagreement occurs, that is the combination of players' risk aversion and uncertainty.

Suggested Citation

  • Yannick Gabuthy, 2003. "Online Dispute Resolution and Bargaining," Working Papers 0304, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:0304
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    References listed on IDEAS

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    1. Crawford, Vincent P, 1979. "On Compulsory-Arbitration Schemes," Journal of Political Economy, University of Chicago Press, vol. 87(1), pages 131-159, February.
    2. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475, June.
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    Cited by:

    1. Gabuthy, Yannick & Jacquemet, Nicolas & Marchand, Nadège, 2008. "Does resorting to online dispute resolution promote agreements? Experimental evidence," European Economic Review, Elsevier, vol. 52(2), pages 259-282, February.

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    More about this item

    Keywords

    economic arbitration; bargaining; double auction; incomplete information; online dispute resolution;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process

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