Automated contracting in distributed manufacturing among independent companies

So far, most distributed scheduling systems have been designed for cooperative agents, and are inappropriate for self-interested agents, as for example in inter-firm interactions such as virtual enterprises. This paper discusses issues that arise in extending automated contracting to operate among such self-interested agents. We construct a leveled commitment contracting protocol that allows self-interested agents to efficiently accommodate future events by having the possibility of unilaterally decommitting from a contract based on local reasoning. A decommitment 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 formally shown that this leveled commitment feature in a contracting protocol increases Pareto efficiency of deals and can enable contracts by making them individually rational when no full commitment contract can. The analysis is nontrivial because self-interested agents decommit manipulatively a Nash equilibrium analysis of the decommitting game is necessary.