Effects of Electronic Markets on Negotiation Processes

Negotiation can be regarded as playing a game with certain rules. If the rules change, the game has to be played differently. Compared to traditional markets, electronic markets can have fundamentally different characteristics such as cost structure or the level of transparency. These differences have already stimulated the tremendous success of one breed of electronic market negotiations: auctions. But auctions offer only limited support for the negotiations that will be necessary in more differentiated markets for complex goods and services. This paper relates the implications of specific electronic market characteristics to the effectiveness of major types of negotiations. The analysis reveals why bidding protocols currently dominate bargaining protocols and suggests that future negotiation support beyond auctions should be based on integrative multilateral protocols.