Superior bargaining power: the good, the bad and the ugly

Abstract

ABSTRACTAbuse of superior bargaining power demonstrates a domain where practice precedes theory. Although the scanty regulation across the world has always been criticized for the lack of legal certainty as well as reasonable economic justification, legislative attempts never rested and extensively emerged in the last decade. The incomplete contract theory may offer one value perspective on the efficient loss of this abusive conduct. Opportunism applied by strong parties in long-term contracts involving relationship-specific investment may cause weak parties to underinvest, thus reducing social welfare. While contract law and antitrust law can mitigate some concerns pertaining to the related abuse, both of them are ultimately not perfect regulatory instruments. Consequently, a special regulation beyond contract law and antitrust law should be established for the purpose of assigning residual rights of control to the parties who have important decisions on the relationship-specific investment.