The Advent of the AI Negotiator

Artificial Intelligence (AI) applications are increasingly used in negotiations. But how about the impact of such applications on negotiation dynamics? A key variable is information. Smart algorithms will drastically reduce information and transaction costs, improve the efficiency of negotiation processes, and identify optimal value creation options. The expected net welfare benefit for negotiators and societies at large is huge. At the same time, asymmetric information will assist the algorithmic negotiator, allowing them to claim the biggest share of the pie. The greatest beneficiary of this information power play could be BigTech and big businesses more generally. These negotiators will increasingly deploy specialized negotiation algorithms at scale, exploiting information asymmetries and executing value claiming tactics with precision. In contrast, smaller businesses and consumers will likely have to settle for generic tools like the free version of ChatGPT. However, who will ultimately be the big winners in AI-powered negotiations depends crucially on the laws that regulate the market for AI applications.

My current working paper on this subject is available for download at SSRN free of charge.