To show how
INSS works a simple negotiation has been set up with the
objective of trying to secure a contract between two companies, Rosa
Inc. and Casa Ltd. Rosa wants to sell an aircraft which Casa is considering
purchasing.
Two INSS users negotiate for Rosa and Casa. Like many INSS users, they have decided to use pseudonyms rather than their real names. "Maki" negotiates on behalf of Rosa Inc. and "Suny" represents Casa Ltd. After they each request an INSS account and are paired up by the system, they are ready to begin.
Both Maki and Suny have carefully read the information about their respective organization to understand the problem and its issues. Since each negotiator can access the system and make a proposal independently, we will follow Maki's side of the negotiation.
There are only two issues in this simple negotiation: the price of the aircraft and the terms of the warranty. It has been established that the normal price of this aircraft is in the range of $300 000 to $320 000. The sensible increase is of $10 000. Thus, the price options are $300 000, $310 000, and $320 000. In this industry there are four types of warranty typically available. The options are: no warranty, a 6 month, one year, and a 2 year warranty.
Both negotiators analyze the two issues and their associated options in terms of their relevance to their respective organizations and move to the pre-negotiation phase.
To prepare for the negotiations Maki and Suny each rated the two issues. Note, that the pre-negotiation steps are conducted independently; one negotiator can never see the information (ratings) that the other negotiator enters.
Maki feels that price is far more important than warranty. Therefore, she assigns 70 points to price and 30 to payment. Although Maki does not know it, Suny feels that each issue is equally important and so Suny assigns 50 points to each.
After rating the issues, the options in each issue must also be rated similarly. In the INSS system, for each issue at least one option must be assigned the maximum rating for the issue and at least one option must be assigned a rating of zero.
Maki considers the three options for the price of the aircraft and assigns the maximum rating (that is, 70) to the price of $320 000 because Maki represents Rosa which wants to sell the aircraft. The lowest possible price is assigned a rating of zero. Maki considers the price of $ 310 000 as somewhat acceptable and assigns a rating of 45.
Maki assigns ratings to each warranty option in a similar way. Note that for Maki, no warranty has the same maximum rating (30) as the 6 months warranty perhaps because the organization does not think it is possible that this plane will fail during the first 6 months of operation.
Given these rankings, INSS proposes a few packages and their rankings to assist in the negotiations.
Maki's package evaluations are below.
The above ratings indicate how good the packages are given Maki's ratings of the issues and options. Comparing the packages Maki decided to change two ratings, for the second and forth package. The second package while worse than the first (best) package is still quite good so Maki increases its rating from 80 to 90. The fourth package is not nearly as good as the third package and Maki downgrades its rating to 60.
INSS uses now the issue, option and package ratings and it determines the
utility function which closely reflects Maki's preferences. These function will
be
used to provide a rating for every considered package.
Maki thought a while on how to begin negotiations. In the meantime Suny prepared and sent the following offer together with a short message:
Maki considers Suny's offer and -- contrary to Suny's expectations -- finds it unacceptable. Note that the offer's rating is only 12. Maki prepares a counter-offer which better reflects Rose Inc. requirements. A message is attached to Maki's offer.
Below are two graphs depicting the history of negotiations. The graph on the left-hand side represents the history from Maki's point of view because Maki's ratings is used. Note that Suny cannot see this graph. The graph that represents Suny's perspective is shown on the right-hand side.
We show the two graphs to indicate that:
Compare Suny's two offers: Offer 2 and Offer 3. In Maki's graph Offer 3 is worse than Offer 2. This is because in terms of Maki's utility function Offer 3 has lower rating than Offer 2. Maki may think that Suny does not want to negotiate because Suny makes a negative or reverse concession (proposes an offer that is worse than proposed previously).
While Maki cannot see the graph on the right-hand side, Maki knows that such a situation is possible. Indeed, Suny thinks that a small concession has been made on behalf on Casa Ltd. because the rating in terms of Suny's utility function for Offer 3 is lower than for Offer 2. The graph on the right-hand side clearly indicates this.
Both of our negotiators should be well aware that such a situation may happen. What one side perceives as a concession, the other side may not see as such. Worse, the other side may consider this as a "reverse concession" or a hardening of one's position.
Maki and Suny continue to exchange offers and messages. On one occasion Maki decided not to send an offer but ask Suny for clarification. Thus, Maki sends only the following message:
Maki and Suny exchange the offers and messages until, in the fourth round, Maki presented an offer which Suny accepted only after a short consideration.
In some negotiations it may happen that the parties reach an agreement but there is one or more packages which are better than the accepted offer for both sides. Note, that better is measured with the parties utility functions. Thus, there may be a package for which the two ratings are higher than the package that has been accepted.
INSS has a post-settlement stage, during which it uses the preference information provided by each user to determine whether it is possible to construct packages that are better for the two parties. In this negotiation INSS determined that Maki's and Suny's settlement could be improved. In this simple negotiation there is only one such package:
| Price | 320 000 $ |
| Warranty | Two years |
Maki asked Suny about this new offer and after a short exchange they both agreed that this last package is superior to the compromise package. Thus the negotiation is completed.
The complete graph of the history of negotiation shows the effect of accepting this alternative. To show the differences between Maki's and Suny's view points we present both graphs noting again that each negotiator can see only his or her graph and cannot see the opponent's graph.
The graph that Maki sees.
The graph that Suny sees.
