- Bargaining power
Bargaining power is a concept related to the relative abilities of parties in a situation to exert influence over each other. If both parties are on an equal footing in a debate, then they will have equal bargaining power, such as in a perfectly
competitive market, or between an evenly matched monopolyand monopsony.
There are a number of fields where the concept of bargaining power has proven crucial to coherent analysis:
game theory, labour economics, collective bargainingarrangements, diplomatic negotiations, settlement of litigation, the price of insurance, and any negotiationin general.
Bargaining power is often expressed as a ratio of a party's ability to influence the other participant, to the costs of not reaching an agreement to that party.
BPA(Bargaining Power of A) = (Benefits and Costs that can be inflicted upon B)/(A's cost of not agreeing)
BPB(Bargaining Power of B) = (Benefits and Costs that can be inflicted upon A)/(B's cost of not agreeing)
If BPA is greater than BPB, then A has greater Bargaining Power than B, and the resulting agreement will tend to favor A. The reverse is expected if B has greater bargaining power instead.
This formulation and more complex versions with more precisely defined variables have been utilised to describe the behavior of parties to a negotiation and determine where their behavior will fall within the possible options they might agree to. Even in a situation of seeming equality there may be underlying factors that more complex models of bargaining power attempt to include.
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bargaining power — noun a) The ability to influence the setting of prices or wages, usually arising from some sort of monopoly or monopsony position or a non equilibrium situation in the market. b) The general concept of how much leverage or influence a bargainer… … Wiktionary
bargaining power — total advantages which one can offer in a negotiation … English contemporary dictionary
bargaining power — / bɑ:gɪnɪŋ ˌpaυə/ noun the strength of one person or group when discussing prices or wage settlements … Marketing dictionary in english
bargaining power — / bɑ:gɪnɪŋ ˌpaυə/ noun the strength of one person or group when discussing prices or wage settlements … Dictionary of banking and finance
power — pow·er n 1: capability of acting or of producing an effect parties of unequal bargaining power 2 a: authority or capacity to act that is delegated by law or constitution often used in pl. commerce power often cap C&P: the power delegated to… … Law dictionary
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