Negotiation is a crucial part of commercial activities in physical as well as in electronic markets (see section 1.3). Current human-based negotiation is relatively slow, does not always uncover the best solution, and is, furthermore, constrained by issues of culture, ego, and pride (Beam and Segev, 1997). Experiments and field studies demonstrate that even in simple negotiations people often reach suboptimal agreements, ther eby “leaving money on the table” (Camerer, 1990). The end result is that the negotiators are often not able to reach agreements that would make each party better off.

The fact that negotiators fail to find better agreements highlights that negotiation is a search process. What makes negotiation different from the usual optimization search is that each side has private information, but neither typically knows the other's utility function. Furthermore, both sides often have an incentive to misrepresent their preferences (Oliver, 1997). Finding an optimal agreement in this environment is extremely challenging. Both sides are in competition but must jointly search for possible agreements. Although researchers in economics, game theory and behavioral sciences have investigated negotiation processes for a long time, a solid and comprehensive theoretical framework is still lacking. A basic principle of microeconomics and negotiation sciences is that there is not a single, “best” negotiation protocol for all possible negotiation situations.