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The Effect of a Stronger Bargain Position on the Perfection and Completeness of a Contract

Author

Listed:
  • Laszlo Csorba

    (Eszterházy Károly Catholic University)

Abstract

With a stronger bargain position, it is possible to achieve more favourable conditions for the potential conclusion of a contract. Although a dominant position is commonly associated with a stronger bargain position, their relationship is neither required nor common. A relatively stronger bargain position usually results from the parties' reliance and dependence on each other. Reliance is generally based on the lack of alternatives and reserves. The effect of basic factors affecting reliance may be influenced by the relevant knowledge and negotiation techniques of a party. Even the conclusion of a so-called perfect contract may be hindered by an intent to abuse a stronger bargain position, and after conclusion, it may lead to performance problems. The conclusion of a so-called complete contract may be hindered as well, since higher risk exposures increase the number of future alternatives. A certain degree of exploitation of a strong or relatively stronger bargain position gained through business successes is an important driving force in market economies, but it is challenging to adjust this to the demands for perfect or complete contracts.

Suggested Citation

  • Laszlo Csorba, 2022. "The Effect of a Stronger Bargain Position on the Perfection and Completeness of a Contract," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 21(3), pages 101-121.
    • Handle: RePEc:mnb:finrev:v:21:y:2022:i:3:p:101-121
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    References listed on IDEAS

    as
    1. Sugata Bag, 2018. "Economic Analysis of Contract Law," Springer Books, Springer, number 978-3-319-65268-9, November.
    2. Ken Binmore, 2007. "Does Game Theory Work? The Bargaining Challenge," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262026074, December.
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    More about this item

    Keywords

    bargain position; dominant position; perfect contract; complete contract; moral hazard;
    All these keywords.

    JEL classification:

    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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