Leveled-Commitment Contracting: A Backtracking Instrument for Multiagent Systems

In (automated) negotiation systems for self-interested agents, contracts have traditionally been binding. They do not accommodate future events. Contingency contracts address this but are often impractical. As an alternative, we propose leveled-commitment contracts. The level of commitment is set by decommitting penalties. To be freed from the contract, an agent simply pays its penalty to the other contract party(ies). A self-interested agent will be ruluctant to decommit because some other contract party might decommit, in which case the former agent gets freed from the contract, does not incur a penalty, and collects a penalty from the other party. We show that despite such strategic decommitting, leveled commitment increases the expected payoffs of all contract parties and can enable deals that are impossible under full commitment. Different decommitting mechanisms are introduced and compared. Practical prescriptions for market designers are presented. A contract optimizer, ECOMMITTER, is provided on the web. T he importance of automated negotiation systems consisting of self-interested agents is increasing. One reason is the technology push of a growing standardized communication infrastructure—the internet, on—over which separately designed agents belonging to different organizations can interact in an open environment in real time and safely carry out transactions (Sandholm and Ferrandon 2000). The second reason is strong application pull for computer support for contracting , especially at the operative decision-making level. For example, we are witnessing the advent of small transaction business-to-consumer and consumer-to-consumer commerce on the internet for purchasing goods, services, information, communication band-width, and so on. Numerous electronic business to business trading sites have also emerged, some of which already incorporate automated negotiation capability. There is also an industrial trend toward virtual enterprises: dynamic alliances of small, agile enterprises that together can take advantage of economies of scale when available (for example, by being able to respond to larger and more diverse orders than they could individually) but do not suffer from diseconomies of scale. Multiagent technology facilitates the automated formation of such dynamic alliances on an order-by-order basis by automated contracting. Such automation can save labor time of human negotiators, but in addition, other savings are possible because computational agents are often more effective at finding beneficial contracts and contract combinations than humans are in strategically and combinatorial-ly complex settings. In traditional automated negotiation mechanisms for self-interested agents, once a contract is made, it is binding (see, for example Andersson and Sandholm contract parties cannot back out no …