Bargaining power as moderator of the 'delay costs effect' in supply chain negotiations

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.