Letter: Are Pareto Improvements Always Preferred by Negotiators?

Rational inefficient compromises in negotiation

“…While we concur on the salience of the issues raised by Korhonen et al (1998), we have argued for a very different role for the "expert" in DSS and NSS. We see the role as being more to help the negotiator/decision-maker to understand the problem and themselves.…”

“…Results of contextually relevant experiments, as the one proposed by Korhonen et al (1998) may be misleading. This is because they introduce context that is designed and interpreted by experimenters but which may be perceived very differently by the subjects.…”

“…There are several suggested reasons for negotiators not to prefer Pareto-improvements (Korhonen, Phillips et al 1998). These include the issue of fairness that has been discussed in experimental economics (Bartos, Tietz et al 1983;Tietz and Bartos 1983;Thompson and Loewenstein 1992) and a possible dislike or distrust of a computer generated outcome.…”

“…This is because if subjects (decision makers, negotiators) can provide any explanation a posteriori for the selection of a particular compromise then the issue space can be modified so that this compromise is efficient. Korhonen et al (1998) suggestion that the rejection of Pareto-improvements may be countered with the introduction of an expert or a third party who designs an appropriate incentive to steer the discussion into new directions. This is because an expert or a third party changes both the context and the dynamics of the process and thus makes the outcomes incomparable with a situation when none of them are present.…”

“…That is they play a role when a situation calls for it but may not be visible in other situations. Korhonen et al (1998) speculations that people through gaining work experience or obtaining higher education are more likely to accept a Pareto improvement seem to have its underlying reasons in their strive for economic rationality. Their axion is--it appears--that economic rationality is a principle which people should apply in making decisions.…”