A Choice of Alternative Strategies in Oligopoly Bargaining

Abstract

Research in bilateral bargaining has shown reciprocal and tough strategies to be superior to soft strategies in producing favorable bargaining outcomes. However, previous research has not examined the effectiveness of opponent strategies in oligopoly bargaining. It was hypothesized that in oligopoly bargaining a soft reciprocal strategy would produce better outcomes than either tough reciprocal or tough strategies. Female students from introductory psychology classes bargained utilizing three programmed strategies. Subjects were afforded the opportunity to bargain with the strategy of their choice and to change opponents (strategies) as they wished. Results indicated that subjects (1) bargained more often with the soft reciprocity strategy than with either the tough reciprocity or tough strategy, (2) made more concessions t o the soft reciprocity strategy, (3) reached more agreements with the soft reciprocity strategy. Furthermore, although the soft reciprocity strategy earned the lowest profit per agreemenf it also earned the largest total profit by virtue of the greater number of agreements.'Requests for reprints should be sent to

Oligopoly Bargaining: Effects of Agreement Pressure and Opponent Strategies

“…The subsequently soft dealers received more offers, reached more agreements, and earned more profit per customer contact than did subsequently tough dealers. This result clarifies and extends the Seholm et al (1985) findings by including all factorial combinations of initial and subsequent strategies. However, this result is inconsistent with the Esser( 1989) study.…”

“…Results consistent with theThibaut and Kelley( 1959) analysis (and contradicting LOA theory) were reported by Seholm et al (1985). In the Seholm et al study each subject (buyer) could bargain with each of three sellers who followed programmed strategies: (a) soft reciprocity involving an initial concession and 100% reciprocation of subject concessions thereafter; (b) tough reciprocity involving no initial concession and 100% reciprocation of subject concessions; and (c) toughness involving no initial concession and reciprocation of 50% of the amount of each concession by the subject.…”

“…Additional results consistent with the Thibaut and Kelley ( I 959) theoretical framework were reported by Esser (1989). Esser reasoned that softest seller strategy was easily identified by subjects in the Seholm et al (1985) study because it involved a large initial concession (the other two seller strategies did not). Furthermore, the softest seller strategy clearly maintained its advantage over the tougher strategies during the subsequent phase of bargaining.…”

“…Bazerman, Magliozzi, & Neale, 1985;Neale, Huber, & Northcraft, 1987) have focused on the competitive market situation involving many buyers and many sellers, relatively few experiments on oligopoly bargaining have been reported (cf. Esser, 1989;Fouraker & Siegel, 1961;Seholm, Walker, & Esser, 1985). In the Fouraker and Siegel experiments the oligopoly simulation involved two or three subjects who were assigned the role of sellers.…”

“…Thus the tabled profits were based on theassumption that most buyers would correctly identify and buy from the lowest seller bid. In the studies by Seholm et al (1985) and Esser (1989) the experimenter played the role of the sellers using a programrned concession strategy. In each experimental session one subject played the role of buyer and negotiated with several sellers, finally choosing to complete a transaction with only one seller.…”