Relative Bargaining Strength Research Articles

An Evidence-Based Approach to Private Ordering

Private ordering – where private actors regulate, enforce, and resolve disputes on their own – has in recent years expanded across business, commercial, and financial sectors. Parties have economic and reputational incentives to take this approach over adjudication by the courts. Parties may prefer private ordering for reasons of process, substance, or both. Even when disputes come before them, courts often defer to parties’ private ordering. Their rationale is that the parties possess a stronger understanding of their intentions than do the courts. This strong assumption, however, depends on parties’ knowledge and relative bargaining strength. In many instances, parties operate under incomplete or imperfect information; additional information could allow parties to enter into more efficient and more fair agreements ex ante, while better informing courts’ approach to adjudicating disputes arising from private ordering ex post. The emergence of artificial intelligence (AI) in legal technology – specifically, in its ability to analyse vast amounts of data – can help advance this augmented informational objective. If made broadly accessible, AI has the potential to equalize information and bargaining power between parties. An empirical evaluation of the validity of assumptions that underpin the general support for private ordering can also be instructive for judges. For this reason, courts have an important role to play in the evolution of private law. Their ability to understand and harness AI can lead in the short term to more effective judicial oversight with respect to private ordering. Over the long term, courts can empower parties to make more informed choices when interacting with one another, reducing inefficiencies and rents.

Arbitration Clauses: The Louisiana Supreme Courtts Flawed Decision in Duhon v. Activelaf, LLC. And Why the Doctrine of Unconscionability Should Be Adopted in Louisiana

Louisiana should give credit where credit is due and recognize the doctrine of unconscionability. Louisiana is the only civil law jurisdiction in the United States. In order to preserve its unique heritage, Louisiana has been reluctant to adopt common law concepts. Because of this reluctance, some beneficial concepts have been rejected or overlooked, such as the doctrine of unconscionability. Common law states use the doctrine of unconscionability to analyze contracts of adhesion, or determine the enforceability of arbitration clauses. Louisiana, on the other hand, utilizes a four-factor test outlined in Aguillard v. Auction Management Corp. The four factors are: (1) the physical characteristics of the arbitration clause, (2) the distinguished features of the arbitration clause, (3) the mutuality of the arbitration clause, and (4) the relative bargaining strength of the parties. The Louisiana Supreme Court used these factors in its decision of Duhon v. Activelaf, LLC. The court failed to use all of the factors and conducted a faulty analysis. This Article discusses how an analysis of all four leads to the conclusion that the disputed arbitration contract is not adhesionary and is valid. This Article also discusses how the doctrine of unconscionability is quite compatible with the Louisiana Civil Code. The doctrine helps fill in the gaps of existing law, which is inadequate when dealing with mass, standard-form contracting.

Core Stability and Core Selection in a Decentralized Labor Matching Market

We propose a dynamic model of decentralized many-to-one matching in the context of a competitive labor market. Through wage offers and wage demands, firms compete over workers and workers compete over jobs. Firms make hire-and-fire decisions dependent on the wages of their own workers and on the alternative workers available on the job market. Workers bargain for better jobs; either individually or collectively as unions, adjusting wage demands upward/downward depending on whether they are currently employed/unemployed. We show that such a process is absorbed into the core with probability one in finite time. Moreover, within the core, allocations are selected that are characterized by surplus splitting according to a bargaining solution such that (i) firms and workforce share total revenue according to relative bargaining strengths, and (ii) workers receive equal workforce shares above their individual outside options. These results bridge empirical evidence and provide a rich set of testable predictions.

What determines the outcome of licensing deals in market for technology? Empirical analysis of sellers and buyers in biotechnology alliances

This paper empirically investigates factors affecting the relative bargaining strength of sellers and buyers in biotechnology markets, using transaction-level data for alliances between 1993 and 2008. Specifically, a two-tier stochastic frontier model is applied to our dataset for estimating the advantage of sellers and buyers, separately, and the advantage difference between them is regressed on possible determinants, such as scope of technology, stage of pharmaceutical R&D process, previous experience forming technology alliances, seller and buyer characteristics, and financial market conditions at the time of agreement. The results show that buyers were greatly advantaged over sellers in many alliances. However, a seller's bargaining position tended to improve significantly after the clinical research phase, as did repeating transactions with previous partners. US sellers also enjoyed an advantage over non-US buyers.

Some (Don't) Like it Hot: The Use of the Hot Goods Injunction in Perishable Agriculture

I. INTRODUCTIONSince its creation in 1938, Department of Labor (DOL) has used Fair Labor Standards Act (FLSA) to improve working conditions and maintain a competitive marketplace by preventing produced under unfair labor practices from entering interstate commerce.1 Under FLSA, one mechanism DOL can use to prevent these from entering marketplace is hot a device that prohibits movement or sale of hot goods in interstate commerce.2 A hot good is a product that a grower intends to place into interstate commerce that grower made or produced using unlawful labor practices, such as paying below minimum wage or using child labor.3 Although DOL historically used this injunction against textile industry, today DOL uses injunction for more diverse products, including perishable agriculture.4The DOL's use of hot goods injunction in perishable agriculture creates unique problems because can spoil while being held, pending resolution of labor issue.5 At same time, most workers who produce perishable agricultural products-migrant farmworkers-face unique challenges in enforcing their legal labor rights, including their transient presence in area and various immigration issues.6 This Note considers whether DOL's use of hot goods injunction in perishable agriculture is justified. Part II discusses history of FLSA hot goods injunction. Part III discusses DOL's use of hot goods injunction in perishable agriculture, focusing on relative bargaining strength of growers against government and migrant farmworkers against farm owners. Part IV concludes that despite inherent risk of economic duress that DOL's use of a hot goods injunction causes, DOL should continue to use hot goods injunction to protect migrant farmworkers because migrant farmworkers face unique obstacles that complicate their ability to enforce their rights and growers have adequate procedural protections. Part IV also concludes that DOL's use of a hot goods objection-a threat of an injunction-is unwarranted because it imposes equally severe hardships on growers without affording them adequate legal protections.II. THE FAIR LABOR STANDARDS ACT'S HOT GOODS INJUNCTIONCongress enacted FLSA in 1938 to address various problems with labor market, including employers' use of unfair labor practices, such as child labor and insufficient pay to gain a competitive advantage in interstate commerce.7 One of methods Congress created to enforce FLSA was hot goods injunction, which allows DOL to prevent produced in violation of FLSA from entering interstate commerce.8 Under FLSA, Secretary of Labor can use a hot goods injunction after investigating production of and attempting to negotiate a settlement with an employer.9 Although DOL does not use hot goods injunction frequently, in past hot goods injunction has served as a powerful tool to halt unfair labor practices.10 This Part discusses overall aims of FLSA, hot goods injunction as an enforcement mechanism of wage and hour provisions of FLSA, and how DOL has successfully used hot goods injunction to fix unfair labor practices. Part II.A of this Note discusses Congress's goals in enacting FLSA. Part II.B examines complexities of hot goods injunction. Part II.C analyzes how DOL has used hot goods injunction in an attempt to end unfair labor practices. Part II.D details primary example of DOL's use of hot goods injunction in garment industry. Part II.E explains how DOL has used hot goods injunction outside of garment industry.A. GOALS OF THE FLSAThe FLSA's declaration of policy states that Congress seeks to remedy the existence, in industries engaged in commerce or in production of for commerce, of labor conditions detrimental to maintenance of minimum standard of living necessary for health, efficiency, and general well-being of workers. …

RELATIVE BARGAINING STRENGTH AND ILLEGALITY Uniting Reformed Church, De Doorns v President of the Republic of South Africa 2013 (5) SA 205 (WCC)

The South African courts have recognized that the relative situation of contracting parties when concluding the contract – the strength of their bargaining positions relative to each other – is a relevant factor when determining whether a particular provision in the contract (or the contract as a whole) is contrary to public policy. However, there are relatively few cases in which the court has actually relied upon inequality of bargaining power as a ground for holding that a contractual provision is illegal. In Uniting Reformed Church, De Doorns v President of the Republic of South Africa (2013 (5) SA 205 (WCC) (the “URC case”)), Zondi J held that one of the reasons why a clause common to certain notarial leases was contrary to public policy was because the contractants had not occupied equal bargaining positions when entering into the leases. Whether or not one fully agrees with the judge’s reasoning, the decision underscores the importance of understanding what is meant by relative bargaining strength and how and when it affects the lawfulness of a contract.

A Bargaining Power Theory of Gap-Filling

This article explores the merits of a new criterion for default rules in incomplete contracts: fill the gaps with terms that are favorable to the party with the greater bargaining power. It argues that some of the more common gaps in contracts involve purely distributive issues, such as the contract price, for which it is impossible to choose a unique, joint maximizing, most efficient term. Rather, the term that mimics the hypothetical bargain in these settings must be sensitive to the bargaining power of the parties - the term they would have chosen to divide the surplus in light of their relative bargaining strength. The article explores the justifications for such a bargain-mimicking principle, the ways it can be implemented by courts, and the subtle ways it is already in place.

Changing the Rules of the Game

This article examines the impact of privatization on the relative bargaining strength of management and trade unions. Findings are based on a study of Ireland's largest telecoms provider, Eircom, which has been privatized since 1999. The privatization of Eircom adopted a stakeholder approach, under which employee share-ownership and management–union partnership played an important role in firm restructuring. Findings show that despite this approach privatization has resulted in a significant decrease in the perceived bargaining strength of unions and an increase in the perceived bargaining strength of management.

Transnational Trafficking, Law Enforcement and Victim Protection: A Middleman Trafficker's Perspective

We explore three hitherto poorly understood characteristics of the human trafficking market – the cross-border ease of mobility of traffickers, the relative bargaining strength of traffickers and final buyers, and the elasticity of buyers' demand. In a model of two-way bargaining, the exact configuration of these characteristics is shown to determine whether domestic and foreign crackdowns on illicit employment mutually reinforce or counteract one another in efforts to stem the tide of trafficking. Estimation results from a gravity model of trafficking present evidence consistent with the mutual reinforcement view, indicating considerable ease of mobility, partial bargaining power, and inelastic demand.

Information, Search, and House Prices: Revisited

Buyers pay different prices for nearly identical homes. One explanation for this is that housing markets are thin, resulting in price bargaining between sellers and buyers. If the relative bargaining power of buyers varies, so will sales prices. One hypothesis is that the relative bargaining strength of buyers coming from outside the local market relative to that of local residents is weak, because distant buyers have high search costs and may know less about the nuances of the local market. Our results, based upon a large number of single-family home transactions from the state of Florida, lend support to this hypothesis. Another related hypothesis is that buyers’ price expectations are anchored to prices they were accustomed to at their previous residence. Hence, if they come from high price markets they will tend to pay more for their new home. This hypothesis is also supported by our results.

The FTAA as a Three-level Bargaining Game

This paper applies Putnam’s (1993) seminal work on negotiations as a two level game, to the Free Trade Area of the Americas (FTAA) negotiations process. The paper compares the domestic ratification processes with the existing web of regional and bilateral trade agreements for insights into the relative bargaining strength and key issues for the most important economies in the hemisphere: the United States, Canada, Brazil, and Mexico. This paper delivers important insights into how the existing international and domestic legal and political context will affect the dynamic shape of FTAA negotiations, with the aim of finding strategies by which Latin American countries (LACs) can maximize their bargaining power.

Hostage Taking: Determinants of Terrorist Logistical and Negotiation Success

This article investigates the determinants of logistical and negotiation success from the terrorists’ viewpoint in hostage-taking missions. Logistical success indicates that the terrorists apparently completed the mission as planned, while negotiation success means that the terrorists received some of their initial demands. In the empirical analysis, the article utilizes a new dataset on hostage incidents from 1978 through 2005 for the logit regressions. Empirical results broadly support the authors’ theoretical predictions. Logistical success depends positively on terrorist resources and target vulnerability, while negotiation success increases with the relative disagreement values and relative bargaining strengths of the terrorists. More specifically, terrorist success at the execution stage depends positively on kidnappings and large hostage grabs and varies negatively with attack force diversity and terrorist casualties. Negotiation success depends on bargaining variables (i.e. the number of hostages, casualties, incident duration, and other proxies). The article shows that the factors that determine terrorist negotiation success differ between kidnappings and non-kidnappings (i.e. skyjackings, the takeover of buildings, and the hijacking of non-aerial means of transport), owing to location and other considerations (e.g. types of demands). In particular, making multiple demands bolsters negotiated success in non-kidnappings, while demanding money fosters negotiated success in kidnappings. Lengthier incidents have a positive influence on the likelihood of terrorists gaining concessions in kidnappings and non-kidnappings.

The Bargaining Strength of a Milk Marketing Cooperative

As a result of economies of size, food processors are generally large and few in number. These characteristics put processors at a bargaining advantage over independent farmers. Marketing cooperatives were established to counter the uneven bargaining position of individual farmers. This article investigates the relative bargaining strength of one milk marketing cooperative and several fluid milk processors. The Nash bargaining model can be used to analyze the negotiated price in the Florida fluid milk market which acts like a bilateral monopoly. The milk marketing cooperatives have bargained well with the milk marketing processors; The monthly bargaining strength of the Southeast Dairy Cooperative, Inc. (SDC), exceeds the monthly bargaining strength of the processors in all twelve months, ranging from a low of 0.6664 in January to a high of 0.7831 in September. The monthly average bargaining strength across all months for SDC is 0.7326.

Wage Bargaining, Privatisation, Ability to Pay and Outside Options: Evidence from Hungary

This article examines the determinants of short-term wage dynamics, using a sample of large Hungarian companies for 1996–99. We test the basic implications of an efficient contract model of bargaining between incumbent employees and managers, which the data do not reject. In particular, there are structural differences between the ownership sectors consistent with our prior knowledge on relative bargaining strength and unionisation measures. Stronger bargaining position of workers leads to higher ability to pay elasticity of wages, and lower outside option elasticity. Our results indicate that while bargaining position of workers in domestic privatised firms may be weaker than in the state sector, the more robust difference relates to state sector workers versus privatised firms with majority foreign ownership.

Holdup and Innovation

This paper examines the incentive to oppose innovation (or to delay agreement) when: there are multiple periods; previous outcomes affect the subsequent distribution of surplus; contracts are incomplete; and the parties are wealth constrained. Current agreements affect the parties, claim on future surplus either by altering their default payoffs (historical bargaining/contractual positions) or by changing their relative contemporaneous bargaining strengths. Delay will occur at different times depending on which assumption applies.

The distributional impact of housing discrimination in a non-Walrasian setting

In a Walrasian housing market, the impacts of discrimination might be expected to be relatively modest. Any agent willing to pay the equilibrium price will be able to obtain a unit eventually, even if he is the last person to be told about available units. An alternative view is that housing markets are essentially non-Walrasian. In such a market there will be no single market-clearing price for housing of a given quality. Similar units will sell for prices that will depend on the relative bargaining strength of the buyers and sellers. In this case discrimination might have more significant effects. We employ an agent-based model of a non-Walrasian housing market to investigate the impacts of access discrimination. We explore the magnitude and distribution of the impacts within the economy.

Sharing Demand Information in a Value Chain: Implications for Pricing and Profitability

While it is known that information exchange (IE) in a value chain improves resource coordination, scant attention has been paid to two issues. The first issue is the effect of relative bargaining strengths of the parties on whether and how IE will be implemented. The second issue is whether a resource-based costing system is adequate to motivate the implementation of information exchange. In this paper, we model a value chain consisting of a manufacturer and a retailer, where the retailer gets (private) demand information that has the potential of improving the manufacturer’s resource decisions. In this model, it is always beneficial for the value chain to implement IE. We show that in a monopsony or in a bilateral monopoly when the retailer has sufficient bargaining power, IE can be implemented if and only if the wholesale price compensates him for the loss of the information rent that he would get without IE. Using this model as the benchmark, we also examine other settings where the retailers have less bargaining power due to competition or size. In such settings, even though the retailers are better informed, the manufacturer can implement the IE regime costlessly and appropriate the information rent partially or fully. In effect, the manufacturer benefits both by improved resource coordination and by reduced payment for information rent. In all these settings, we find the retailer will not be motivated to adopt IE solely by a resource-based costing and pricing system.

Tax and subsidy incidence equivalence theories: experimental evidence from competitive markets

A basic tenet in microeconomics is tax incidence equivalence, which holds that the burden of a unit tax on buyers and sellers is independent of who actually pays the tax. By contrast, policymakers and the public often mistake statutory incidence for economic incidence. Using competitive laboratory markets, I test both tax incidence equivalence and an analogous theorem for subsidies. For sufficiently large markets, the results show strong support for both theories; there is little to no evidence, even in the short run, of the popular misperception that statutory incidence equals economic incidence. In smaller markets in which competitive forces are weaker and relative bargaining strengths may play a role, the evidence for tax incidence equivalence is weaker as minor price discrepancies may persist between markets.

Productivity, Wages and Human Capital

The present paper considers cost-sharing contracts in the presence of firm-specific training and examines the optimal wage profiles in a hierarchical firm. Our analysis shows that (a) a two-part burden on the lower-level employee exists (b) the lower-level employees may cross-subsidize the higher-level employees, leading to inequality in earned income (c) the relative bargaining strengths of the employers and the employees play an important role in determining the wage profiles and the employment structures.

Explaining the International CEO Pay Gap: Board Capture or Market Driven?

Explaining the International CEO Pay Gap: Board Capture or Market Driven?