Bargaining theories

Bargaining Range theory

This theory has its roots with the late Prof. A.C. Pigou. His theory explains the process by which labour and management establish upper and lower wage limits within which a final settlement is made. The upper limit presents the union ideal wage. Management will offer a wage that is well below that acceptable to the union. From these two extremes, the union and the management team will normally proceed through a series of proposals and counter proposals. The union will gradually reduce its wage demands while the employer will raise its wage offer. Both sides, however, have established limits as to how far they are willing to conceived, and in the process establish taking point. According to this theory, the exact settlement point will depend on the Bargaining skills and strength of the union and management negotiators.

Chamberlain Model
This model focus on upon the determinants of Bargaining power and the ways in which changes in these determinants lead to settlement in the majority of the collective Bargaining situations. He defines power as the ability to secure opponents agreement to your terms. Thus a union Bargaining power can be defined as management willingness to agree to the union terms or demands. But what determines the willingness (or unwillingness) of management to agree to the union terms? The answer, according to him, depends upon how costly disagreeing will be relative to how costly agreeing will be i.e.: Managements perceived cost of disagreeing with the unions terms (MCD) Unions Bargaining Power = ------------------------------------------------------------------------------------------ (1) Management perceived cost of agreeing with the unions terms (MCA)

If management estimates that it is more costly to agree than to disagree (i.e. if the Unions Bargaining Power is less than one), management will chose to disagree and there by reject the unions terms. If however, management judges that it is more costly to disagree than to agree (i.e., if the Unions Bargaining Power is greater than one) management will choose to agree. Managements bargaining Power can be similarly define as; Unions perceived cost of disagreeing managements with managements Terms (UCD) Bargaining power (MBP) = --------------------------------------------------------------------------------------------- (2) Unions perceived cost of agreeing with management s terms (UCA)

Once again if the union believes that it is more costly to agree than to disagree the union will disagree with managements offer whenever the denominator is greater than the numerator in eq. 2 i.e., whenever the management is bargaining power is less than 1; the union will choose to reject managements offer. Conversely, if the union judges it to be more costly to disagree than to agree, the union will choose to agree. In other word, when managements bargaining power in greater than 1, the union will be willing to accept managements offer. The unions cost of disagree and agreeing can be defined similarly to those of management. The chamberlain Bargaining power model has no. of salient feature:1) At least one party must perceive disagreement to be more costly than agreement in order for the agreement to occur. 2) Once bargaining power is relative in that it depends on the size of the wage increase on is asking for or offering. 3) Misjudgements of the maximum offer the employer will make (or the minimum offer the union will accept) or the commitment of the parties to irreconcilable positions may result in strike even though a mutually acceptable settlement exist. 4) Compromise offers (and demands) and the approach of the bargaining deadline both tend to remove the parties toward the agreements. 5) The model allows for coercive tactics (which increase opponents cost of disagreeing) and for persuasive tactics (which reduce your opponents cost of agreeing).

6) The economic environment, including both the state of the macro economy and industry structure can affect the Bargaining power of both the parties.

Hicks Bargaining model

This model focuses on the length and the cost of work stoppages. Hicks proposed that union and management negotiators balance the cost and benefits of a work stoppage when making concessions on the Bargaining table. Each side make concessions to avoid a work stoppage. The central idea is that there is a functional relation between the wage that one or the other party will accept and the length of the strike that would be necessary to establish that wage. There is a particular wage that the employer would prefer if the union is not in the picture. He will concede more, however, in order to avoid a strike and up to a point, his concession will rise with the length of the strike he anticipates. A primary difference between the hicks model and Bargaining Range theory is that the hicks model pinpoints precise wage settlements while the range theory does not.

Negotiating models:Walton and Mkersie proposed one of the most influential models in analysing negotiations. They distinguished the following four systems of activity or sub processes in labour negotiations, each having its own functions for the interacting parties. 1) Distributive bargaining: - the function of which is to resolve conflicts between the parties. 2) Integrative bargaining:- the function of which is to find common or complementary interest.

3) Attitudinal structuring: the function of which is to influence the attitudes of the participants towards each other. 4) Intra organizational bargaining: - the function of which is to achieve consensus within each of the interacting group.