Abstract
This paper explores the extent to which bargaining power asymmetries among supply chain members moderate the effect that the delay costs of the setting exert on negotiation outcomes. First, we propose that the influence of delay costs on the initial gap between the bargaining demands of sellers and buyers (i.e., initial bargaining gap) decreases when buyers have a bargaining power advantage over sellers. Second, we posit that this moderation effect reduces the indirect effect that the delay costs have on negotiation outcomes (via the initial bargaining gap). To test these notions, we conduct a 2 × 2 between-subjects experiment with undergraduate students from a large European university in which we manipulate the relative bargaining power and delay costs of the setting. We conduct our analysis with 292 observations. Our findings support our theoretical predictions. Specifically, results indicate that bargaining power moderates (i.e., reduces) the effect of the delay costs on negotiation processes by reducing their influence on the initial bargaining gap. Likewise, our analysis shows that because more powerful buyers are less likely to modify their behavior as a result of the delay costs, they face a higher risk of obtaining suboptimal bargaining profits.
Highlights
Prior behavioral research on accounting and psychology exploring buyer-seller cooperative negotiations finds that buyers that have more bargaining power than their counterparties usually demand and obtain a larger slice of the bargaining pie (e.g., De Dreu and Van Kleef, 2004; Van den Abbeele et al, 2009)
We expand the experimental accounting literature address ing the effects of relative bargaining power in supply chain negotiations (e.g., McCracken et al, 2011; Drake and Haka, 2008; Van den Abbeele et al, 2009; Chang et al, 2013; Masschelein et al, 2012) by showing that relative bargaining power promotes a distributive bar gaining approach but it reduces the extent to which negotiators consider other environmental factors into their decision-making pro cess. In this way, when a negotiator is in a disadvantageous bargaining power position, she should not expect the powerful counterparty’s behavior to be flexible as a result of other environmental factors, such as the delay costs
Consistent with our theoretical framework, these results suggest that Buyer-Relative Bargaining Power influences Bargaining Profits in an indirect way, by moderating the effect of the delay costs on the initial bargaining gap
Summary
Prior behavioral research on accounting and psychology exploring buyer-seller cooperative negotiations finds that buyers that have more bargaining power than their counterparties (i.e., sellers) usually demand and obtain a larger slice of the bargaining pie (e.g., De Dreu and Van Kleef, 2004; Van den Abbeele et al, 2009). We claim that the extent to which the delay costs of the bargaining setting align the initial bargaining demands of sellers and buyers (i.e., sellers’ initial offer and buyers’ first counteroffers) and in fluence the outcomes of negotiations decreases when buyers have higher relative bargaining power than sellers. Because initial offers inform negotiators of their counterparties’ aspirations and general bargaining approach (e.g., Galinsky, 2004; Thompson, 2004), we expect the initial bargaining gap to exert an important influence on the negotiation process. These notions suggest that the delay costs are likely to influence the outcomes of negotiations indirectly through the initial bargaining gap. Because relative bargaining power makes negotiators perceive a higher control over negotiation outcomes (Fast et al, 2009)
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