Which of the following is true of repeated negotiations between two firms?
A)In a repeated negotiation the bargaining behavior of the firms is motivated solely by the immediate profit available from an agreement.
B)The reputation of a firm does not play a significant role in repeated negotiations.
C)Repeated negotiations enhance the scope for purely opportunistic behavior by firms.
D)The firm with a weaker bargaining power is in a position to receive a greater share of the profit in repeated negotiation.
E)In repeated negotiation firms have obvious incentives to maintain a cooperative relationship.

Question

Quizplus · Accepted Answer

In repeated negotiations between two firms, there are obvious incentives for them to maintain a cooperative relationship. This is because both firms realize that they will have to negotiate with each other again in the future and therefore want to build a reputation for being fair and trustworthy negotiators. This can lead to a mutually beneficial outcome for both firms in the long run. None of the other options are true - bargaining behavior is not solely motivated by immediate profit, reputation does play a significant role, repeated negotiations actually reduce the scope for opportunistic behavior, and there is no guarantee that the weaker bargaining power will receive a greater share of the profit.

Which of the Following Is True of Repeated Negotiations Between