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The Ultimatum Conundrum
Karp, Alan H.; Chen, Kay-yut; Wu, Ren
Keyword(s): automated negotiation; game theory; bargaining
Abstract: We have developed software that adapts the techniques used by game playing computer programs to the problem of negotiating good deals. In every test case, this strategy recommends making an ultimatum. On examining the protocol, we found that it is equivalent to a standard form of the bargaining game, which has an ultimatum as the Nash equilibrium. In practice, this strategy is unlikely to lead to a desirable result. We report several failed attempts to induce the strategy to recommend more reasonable counteroffers. Only when we include uncertainty in the other participant's constraints does the strategy recommend a counteroffer other than an ultimatum. We show how this uncertainty can be included in the strategy algorithm without introducing heuristics.
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