Michael Caosun

Michael Caosun, Sinan Aral

Experimental evidence confirms that AI tools raise worker productivity, but also that sustained use can erode the expertise on which those gains depend. We develop a dynamic model in which a decision-maker chooses AI usage intensity for a worker over time, trading immediate productivity against the erosion of worker skill. We decompose the tool's productivity effect into two channels, one independent of worker expertise and one that scales with it. The model produces three main results. First, even a decision-maker who fully anticipates skill erosion rationally adopts AI when front-loaded productivity gains outweigh long-run skill costs, producing steady-state loss: the worker ends up less productive than before adoption. Second, when managers are short-termist or worker skill has external value, the decision-maker's optimal policy turns steady-state loss into the augmentation trap, leaving the worker worse off than if AI had never been adopted. Third, when AI productivity depends less on worker expertise, workers can permanently diverge in skill: experienced workers realize their full potential while less experienced workers deskill to zero. Small differences in managerial incentives can determine which path a worker takes. The productivity decomposition classifies deployments into five regimes that separate beneficial adoption from harmful adoption and identifies which deployments are vulnerable to the trap.

Michelle Vaccaro, Michael Caosun, Harang Ju et al.

We conducted an International AI Negotiation Competition in which participants designed and refined prompts for AI negotiation agents. We then facilitated over 180,000 negotiations between these agents across multiple scenarios with diverse characteristics and objectives. Our findings revealed that principles from human negotiation theory remain crucial even in AI-AI contexts. Surprisingly, warmth--a traditionally human relationship-building trait--was consistently associated with superior outcomes across all key performance metrics. Dominant agents, meanwhile, were especially effective at claiming value. Our analysis also revealed unique dynamics in AI-AI negotiations not fully explained by existing theory, including AI-specific technical strategies like chain-of-thought reasoning, prompt injection, and strategic concealment. When we applied natural language processing (NLP) methods to the full transcripts of all negotiations we found positivity, gratitude and question-asking (associated with warmth) were strongly associated with reaching deals as well as objective and subjective value, whereas conversation lengths (associated with dominance) were strongly associated with impasses. The results suggest the need to establish a new theory of AI negotiation, which integrates classic negotiation theory with AI-specific negotiation theories to better understand autonomous negotiations and optimize agent performance.