Relative Bargaining Research Articles

Bargaining powers in cooperative Carbon Dioxide Removal deployment

ABSTRACT International cooperation has the potential to significantly reduce the costs of implementing Carbon Dioxide Removal (CDR) in line with the Paris Agreement. However, the success of interregional cooperation depends on whether a satisfying agreement can be reached. Regional bargaining powers may heavily influence the outcome of such an agreement. This paper uses cooperative game theory to assess bargaining powers in the cooperative deployment of CDR between the United States (US), the European Union (EU), Brazil, and China. We compute least-costly CDR pathways under multiple cooperative configurations using the Modelling and Optimisation of Negative Emissions Technologies (MONET) framework, assuming regional CDR targets that are proportional to greenhouse gas emissions. Then, we apply cooperative game theory to derive relative bargaining powers from the cost evaluations in MONET. We find that cooperation can lead to substantial CDR cost reductions, ranging from 11% to 43%. Furthermore, we identify two distinct types of regions that possess considerable bargaining power: (1) regions with minimal historical responsibility towards climate change but abundant resources for CDR implementation (exemplified by Brazil in this study); and (2) regions with limited domestic resources amidst large CDR targets (represented by either the USA or China, here). These findings illustrate the potential leverage certain regions in the Global South could wield in the collaborative deployment of CDR under Article 6 of the Paris Agreement.

Exploring Education-Induced Bargaining Power of Women on Household Welfare in Sub-Saharan Africa

Women’s education and empowerment have engaged the interest of policymakers and academics for many years. We employ individual-level data from Ghana and Uganda in this paper to offer a comparative analysis of the impact of women’s education and empowerment on six household welfare indicators: child labor, child school enrollment, female labor force participation, fertility rate, household food expenditure, and nutrition intake. Comparing the two countries is insightful due to their distinct socio-economic structures and cultural contexts, which might influence the dynamics of women’s empowerment differently. The study utilizes the Ordinary Least Squares (OLS) and Instrumental Variables (IV) regressions and provides a battery of robustness tests. The empirical results show that in a household, the woman’s and man’s education levels are significant determinants of household welfare. However, contrary to common assumptions, the woman’s education does not have a stronger effect than the man’s, and her relative bargaining position has negligible effects on the welfare indicators studied, at least for the cases of Ghana and Uganda. Further sensitivity checks support these findings, suggesting that female education can improve household welfare, but its impact may not necessarily operate through enhanced bargaining power within the household.

Porter Framework vs A More Extended Framework

Michael Porter presents a framework for defining an industry's structure to assist strategic teams in identifying the right strategy to gain a competitive advantage over rivals. This framework is based on two major axioms that determine the industry's structure. The first axiom focuses on the relationship among firms in the value chain, involving a zero-sum or distributive bargaining relationship according to Porter. The second axiom sets out that all firms in an industry are confronted with similar conditions. We defend an alternative axiom in determining the industrial structure. The assumption here is that participants in a value chain are involved in a non-zero-sum or integrative bargaining relationship. The alternative axiom that focuses more on mutual cooperation between participants in the value chain is more appropriate for the long-term prosperity of the company. It provides a better set of factors influencing a greater degree of market penetration and profits in the long run. In this paper, we add two more forces to Porter’s Framework that according to today’s business environment and context will help to create a more complete framework for analyzing the industry. We plan to use and test the framework as a basis for research in the future in order to determine the competitive advantage of businesses operating in an industry but with different means, in other words from brick-and-mortar businesses to totally virtual firms that have flourished over the past years. The modeling tools help in understanding the business potential, whereas, the value chain analysis provides help to understand where the most productive advantage is based.

Integrating host-country political heterogeneity into MNE–state bargaining: insights from international political economy

The international business (IB) literature has emphasised the heterogeneity of firm strategies in shaping MNE–state bargaining, but largely ignored the heterogeneity of states. In contrast, the international political economy (IPE) literature provides a more nuanced consideration of state strategies and their economic and political priorities. We seek to address this oversight by making two related contributions. In the context of MNE–state bargaining, we first discuss how differences in political systems and the political and economic objectives of states may affect their negotiating stance with MNEs. We consider the impact of changes in the balance of state objectives by considering how much importance governments assign to improving the welfare of its broader population, relative to how important they are concerned with the “private benefits” that accrue to the political elites. This enables us to add micro-foundations to the characterisation of the state. Second, we apply a Nash bargaining framework to MNE–state negotiations that vividly captures the relative bargaining powers of the MNE and the state, including how “outside options” available to these two actors can influence the shape of actual bargains. We discuss the implications of these two contributions for future research.

Deal completion in cross border acquisitions waves: The role of deal timing and pace

AbstractResearch SummaryCross‐border acquisitions (CBAs) exhibit a wave‐like pattern, clustering temporally, industry‐wise, and at the country level. We draw upon the bargaining power perspective and argue that CBA wave context alters the relative bargaining position between acquirer and target firms, which affects deal completion. Our findings suggest that acquisition wave deals have a lower likelihood of completion compared to non‐wave deals. However, within a CBA wave, we find that acquirers that move early and with a high acquisition pace have a higher likelihood of deal completion. We test our arguments on a simulation‐based dataset comprising 17,815 wave and non‐wave deals identified between 1990 and 2012 across 13 acquirer and 21 target countries. We contribute to the CBA literature by differentiating between wave and non‐wave environments and their impact on deal completion.Managerial SummaryCross‐border acquisitions (CBAs) often happen in waves that emerge at the industry and country‐levels. These waves are characterized by heightened level of acquisition activities such that the relative position of acquirer and target firms is different within waves as compared to outside of the waves. As a result, acquisition deals announced within waves are less likely to be completed than those announced outside of the waves. At the same time, acquiring firms that announce acquisitions at an early stage within a CBA wave and move with a faster speed to conduct more acquisitions are more likely to successfully close the deals than other firms.

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.

Intra-Household Income Management and Couple’s Relative Sharing of Income and Environment Sustainability in Japan

This study aims to identify household members’ income sharing, when the amount of said income is governed by a particular household member. The results are expected to provide insightful evidence that identifies who is under the poverty line within families. This will illustrate the intra-household allocation inequality by observing the members’ household income dominance. Using the information on household income management obtained from the Japanese Household Panel Survey data (1993–2013) and the original Internet survey, this paper develops an alternative methodology to estimate the household income distribution of couples. A two-step estimation process was employed to estimate the wife’s manageable income equation. Then, the parameters were substituted into the husband’s manageable income equation to estimate the parameters for calculating the wife’s sharing rule. The results are as follows. First, a wife’s share of intra-household resources positively correlates to her manageable income resources. However, wives have weak power in expending the transferred income from their husbands. Second, the remarkable feature is that, on average, wives share 37% of the resources, meaning that the wives’ relative bargaining is weaker than the husbands’. Narrowing the gap in terms of hourly wage between husbands and wives is a crucial tool to reduce the intra-household allocation gap. Third, the wives’ relative intrahousehold income allocation improvement is associated with household environment sustainability activities. To improve the intra-household income allocation inequality, we provide an original approach to explore the intra-household head of household members’ relative income sharing. The results highlight the inequality of intra-household income distribution and confirm that reducing the income gap would be a crucial improvement factor.

Do Alimony Regulations Matter Inside Marriage? Evidence from the 2008 Reform of the German Maintenance Law

This study investigates how West German spouses have responded to the alimony reform introduced in 2008. This reform imposed financial self-responsibility after a finalized divorce. It weakened the relative bargaining position of the spouse with a claim for maintenance in the case of a potential divorce before the law change. Therefore, the present study helps to verify bargaining models by considering this policy change as a shift of spousal bargaining power. Estimating difference-in-differences models, I find that, indeed, wives who face a potential alimony loss might have increased their working hours as a result of the 2008 reform. Thus, this finding suggests that family law may affect labor market outcomes. To my knowledge, the present investigation is the first analysis of the behavioral response of individuals in longer marriages to this change in alimony law. Its approach to identifying those who have been (dis)advantaged by this reform is a new one, proposing a method that reflects the realities of alimony arrangements.

The impact of oil prices on world trade

AbstractIn this article, we investigate the importance of fuel costs in shaping trade. We use AIS data on ship locations and transaction‐level shipping prices, along with a dynamic model describing the shipping industry, to measure the elasticity of bulk goods trade with respect to ship fuel costs. We find that the average estimated elasticity is 0.35, but ranges from 0.1 to about 1.2 depending on the level of the fuel cost. The pass‐through of fuel costs to transport costs is low, at 0.17. Strikingly, this elasticity features a pronounced asymmetry in low versus high oil prices. As fuel costs decline, the elasticity plateaus and further declines have little impact on trade. This “flattening out” of the elasticity is attributed to the equilibrium of the transportation sector and in particular the changes in the relative bargaining positions of ships and exporters. Finally, we use the estimated elasticity to assess the importance of ship design on trade flows: if the large fuel efficiency gains achieved in the 1980s had not been realized, trade would be 12% lower today.

Control Point Dynamics in Emerging Digital Business Ecosystems: The Case of the Digital Agriculture

With the emergence of digital technologies, companies move from vertically integrated value chains towards digital business ecosystems. In such ecosystems, companies leave their original bargaining position, where they are aware of who creates how much value and how much control they have in negotiating value capture. In digital business ecosystems, however, the control over value creation is dispersed among multiple actors, across different industries and encompassing different layers (e.g. physical devices, networks, services and content). As a consequence, tension between value creation and value capture increases, as value creation occurs by means of cooperation and value capture is determined by a bargaining relationship. Prevailing theories and concepts such as Porter’s five forces or the resource-based view provide an insufficient explanation of how companies manage to achieve a competitive advantage in a digital business ecosystem. This paper sheds light on the less explored concept of control points reflecting the dynamic bargaining situation in emerging digital business ecosystem. Therefore, we conduct a multiple-case study with 15 companies, industry associations and consultancies in the digital agricultural ecosystem. We identify nine different control point categories emerging on the way from the traditional linear value chain towards digital business ecosystems. Subsequently, we derive six exemplary strategies based upon various control point constellations and thus actor’s superior power in e.g. having digital or physical customer access or being able to provide the necessary infrastructure to connect various actors in the ecosystem.

Healing Stalemates: The Role of Ceasefires in Ripening Conflict

Ceasefires are often associated with inhibiting conflict ripeness because they remove the immediate costs of conflict and the pressure on conflicting parties to negotiate. Yet, in many intrastate conflicts, ceasefires have proven instrumental in reviving or enabling peace talks. This article provides an analytical framework to systematically assess the impact of ceasefires on conflict ripeness and identify key factors that condition their effects. Enriching ripeness theory with insights from the related bargaining theory of war and ceasefire research, this article identifies three key milestones in the transition from war to negotiated settlement—ripeness for negotiations, for concessions and for settlement—and the conditions that help conflicting parties reach these milestones. It demonstrates how and why ceasefires have the potential to foster ripeness at all three stages, whereas ceasefire violations threaten to undermine the ripening process, particularly after the onset of negotiations. The analysis suggests that temporal limits to ceasefires in the first two ripeness stages increase the probability that ceasefires contribute to ripening, while in the third stage, it is better that parties agree on an indefinite ceasefire or link it to the progress of negotiations in order to enable movement towards settlement. External enforcement of a ceasefire can pose a significant impediment to conflict ripeness.

Investment Incentives in Multi-Product Distribution Channels

Distribution channels in which a common retailer undertakes long-term investments and coordinates the sale of competing products are prevalent in many industries. We study how the allocation of bargaining power among the retailer and the suppliers affects investment incentives, market shares, and profits. We identify conditions for efficient investment in terms of the parties' relative bargaining powers, market shares, and the sensitivity of consumer demand to investment. Compared to outcomes in two-party distribution channels, where the absolute bargaining power of the retailer relative to the supplier determines the degree of underinvestment, our analysis reveals the following differences: (i) The relative bargaining power of suppliers that do not negotiate directly with each other is a key determinant of investment, productive efficiency, and channel efficiency. (ii) Investments can be efficient even when the investing retailer has less than full bargaining power, or inefficient when the retailer does have full bargaining power. (iii) Inefficiencies can occur as both under- or overinvestment, with a corresponding misallocation of market shares. (iv) Channel profitability is an inverted-U shaped function of the retailer's bargaining power. (v) Higher retailer bargaining power relative to one supplier reduces the profit of the other supplier. Our insights are robust when the retailer or the suppliers can undertake long-term product-specific investments or when the multi-product channel consists of a backward-integrated retailer and an independent supplier.

Going Dark

Going Dark

Deal motivations and bargaining power: do executives show their hand in SEC filings?

Our study tests the bargaining power hypothesis by examining how the operating, marketing, and financial deal motivations cited by the merging-firm managers in company filings with the Securities and Exchange Commission affect their relative bargaining power in value-increasing mergers. We find that acquiring-firm shareholders capture an average of 40.1% of the total shareholder gain. Further analysis shows that acquiring-firm managers gain bargaining power when the target-firm executives cite the acquirer’s technological expertise as a reason for the merger, whereas acquiring-firm managers lose bargaining power when the acquirers cite the target’s technological expertise. Acquirers also lose bargaining power when the target managers cite the acquirer’s manufacturing/resource capacity as a motivation. These results support the role that strategic fit and industry factors play in driving the managers’ relative bargaining position. Finally, our finding that acquiring-firm managers gain bargaining power when the targets cite access to capital or expanding the customer base as a deal motivation sheds light on why firm size is an important determinant of bargaining power. Our study contributes to the literature by providing evidence that acquiring-firm managers often have more bargaining power than previously thought based on empirical studies that analyze the cumulative abnormal returns earned by target- and acquiring-firm shareholders at the merger announcement date.

‘til Dissolution Do Us Part: (Re)Assessing the First Contract and Trial Marriage Goals of First Contract Arbitration in Ontario

Using a series of labor law reforms in the Canadian province of Ontario between 1991 and1998, this article seeks to (re)assess and compare the effectiveness of two forms of first contract arbitration (FCA) in satisfying the primary policy goals of aiding in the achievement of a first contract and in establishing lasting bargaining relationships. In contrast to previous research findings using this setting, the analysis fails to identify any statistically significant difference in the achievement of first contracts across the automatic and no‐fault forms of FCA. Further, estimates do not appear to identify a statistically significant difference in the establishment of lasting bargaining relationships, defined as the settlement of three of more collective agreements, across the two forms of FCA. These findings indicate that differences observed during this period in the first contract success rate and the establishment of bargaining relationships may be confounded with other factors than the changes to first contract arbitration.

Práticas de barganha política por meio da execução orçamentária federal

Resumo O processo orçamentário brasileiro tem sido historicamente questionado pela suposta presença de barganha política na inclusão e na execução de emendas ao orçamento, fato que interfere nas premissas, nos critérios e nas práticas das escolhas alocativas. Este artigo, sustentado pela Teoria da Formação de Coalizões, investiga a existência de uma possível relação de barganha política entre os poderes Executivo e Legislativo no processo orçamentário na esfera federal. Tal pesquisa ocorre por meio da análise das execuções de emendas parlamentares singulares ao longo de cinco legislaturas (entre 2000 e 2017) e das decisões dos deputados na votação de projetos propostos pelo Executivo. Analisaram-se dados referentes à execução de emendas singulares, bem como aqueles concernentes à posição política do parlamentar com relação ao Executivo no instante da proposição das emendas. A metodologia envolveu técnicas econométricas que lidam com a correção do viés de seleção para avaliar a presença ou não da referida relação de barganha. Os resultados obtidos corroboram a hipótese de existência de barganha política entre os poderes Executivo e Legislativo, pois o parlamentar com maior aporte de execução de suas emendas singulares foi aquele que, além de ter exercido apoio ao Executivo através de votos favoráveis aos projetos enviados ao congresso nacional, era de fora da coligação de governo, alvo do Executivo na formação do quorum mínimo para a aprovação de seus projetos.

Pareto-optimal insurance contracts with premium budget and minimum charge constraints

In view of the fact that minimum charge and premium budget constraints are natural economic considerations in any risk-transfer between the insurance buyer and seller, this paper revisits the optimal insurance contract design problem in terms of Pareto optimality with imposing these practical constraints. Pareto optimal insurance contracts, with indemnity schedule and premium payment, are solved in the cases when the risk preferences of the buyer and seller are given by Value-at-Risk or Tail Value-at-Risk. The effect of our constraints and the relative bargaining powers of the buyer and seller on the Pareto optimal insurance contracts are highlighted. Numerical experiments are employed to further examine these effects for some given risk preferences.

Fast Action Can Erase Unlawful Conduct

Faced with union activity, it's not unusual for a supervisor to make a comment or take an action that is unlawful. As regular readers of Management Report are aware, unlawful activity during a union campaign can have significant consequences. For example, unfair labor practice findings can provide fertile campaign material for a union, cause an election win to be nullified, and, in the most extreme cases, hand the union a free pass to a bargaining relationship.

Understanding the Exposure at Default Risk of Commercial Real Estate Construction and Land Development Loans

We study and model the determinants of exposure at default (EAD) for large U.S. construction and land development loans from 2010 to 2017. EAD is an important component of credit risk, and commercial real estate (CRE) construction loans are more risky than income producing loans. This is the first study modeling the EAD of construction loans. The underlying EAD data come from a large, confidential supervisory dataset used in the U.S. Federal Reserve’s annual Comprehensive Capital Assessment Review (CCAR) stress tests. EAD reflects the relative bargaining ability and information sets of banks and obligors. We construct OLS and Tobit regression models, as well as several other machine-learning models, of EAD conversion measures, using a four-quarter horizon. The popular LEQ and CCF conversion measure is unstable, so we focus on EADF and AUF measures. Property type, the lagged utilization rate and loan size are important drivers of EAD. Changing local and national economic conditions also matter, so EAD is sensitive to macro-economic conditions. Even though default and EAD risk are negatively correlated, a conservative assumption is that all undrawn construction commitments will be fully drawn in default.

Cooperação intergovernamental e consórcios públicos: uma análise da celebração de convênios

The article aims to investigate how intermunicipal public consortia establish agreements with central government agencies - Union and states. For this, we use the theory approach that deals with the inter-federative relations in Brazil and analyze data obtained in the Union and some government´s transparency portals. Among the results, we identified a very heterogeneous pattern of signing agreements between states and regions of the country, which is related to the differential role that state governments and the Union play as financiers of public consortium activities in Brazil. Given the unprecedented character of the study, we concluded that more localized approaches are needed to identify how the bargaining and negotiation relationships between consortia and other levels of government take place.Keywords: Cooperation, federalism, public consortia, voluntary transfers.