Whimsical or coherent offers in negotiation under incomplete information: A real option approach

Moon Yongma, Tao Yao

Research output: Contribution to conferencePaper

Abstract

This article proposes a quantitative model to explain how human behavior affects a bilateral negotiation agreement under incomplete information and provides theoretical basis to support decisions with equilibrium information. A real option approach is applied to our model to represent incomplete information in the negotiation such as uncertain value of goods, strategic deferment, and decisional irreversibility of a competitor. This approach allows us to develop the conditions and probability of a negotiation agreement in analytical form solution. Numerical analysis shows that the probability is generally maximized when a seller offers prices whimsically and a buyer offers coherently.

Original languageEnglish (US)
Pages1874-1879
Number of pages6
StatePublished - Dec 1 2008
EventIIE Annual Conference and Expo 2008 - Vancouver, BC, Canada
Duration: May 17 2008May 21 2008

Other

OtherIIE Annual Conference and Expo 2008
CountryCanada
CityVancouver, BC
Period5/17/085/21/08

All Science Journal Classification (ASJC) codes

  • Computer Science Applications
  • Software
  • Industrial and Manufacturing Engineering

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    Yongma, M., & Yao, T. (2008). Whimsical or coherent offers in negotiation under incomplete information: A real option approach. 1874-1879. Paper presented at IIE Annual Conference and Expo 2008, Vancouver, BC, Canada.