1 Advantages of a Leveled Commitment Contracting

In automated negotiation systems consisting of self-interested agents, contracts have tradition-ally been binding. Such contracts do not al-low agents to efficiently accommodate future events. Game theory has proposed contingency contracts to solve this problem. Among com-putational agents, contingency contracts are of-ten impractical due to large numbers of inter-dependent and unanticipated future events to be conditioned on, and because some events are not mutually observable. This paper proposes a leveled commitment contracting protocol that allows self-interested agents to efficiently ac-commodate future events by having the possi-bility of unilaterally decommitting from a con-tract based on local reasoning. A decommit-ment penalty is assigned to both agents in a contract: to be freed from the contract, an agent only pays this penalty to the other party. It is shown through formal analysis of several contracting settings that this leveled commit-ment feature in a contracting protocol increases Pareto efficiency of deals and can make con-tracts individually rational when no full com-mitment contract can. This advantage holds even if the agents decommit manipulatively