Although price is emphasized in this hypothetical case there are many 

 other benefits which are bargained for in the process. These have been 

 indicated in other places in this publication and are not repeated here. 



The psychological effect of the threat by the cooperative to induce its 

 members to shift their land to other uses coupled with a sound knowledge 

 of market facts, profitable alternatives, and the ability to use and. inter- 

 pret those facts are the important faster s in the negotiations process « 

 Of .course, at any given time the cooperative must balance the costs of con- 

 cession against the advantages of their other alternatives* At its maximum 

 asking orice the cooperative would have no reason to withhold acreage at 

 all; it may want to increase it 3 



The processor will also employ the psychological effect of a threat to let 

 his plant lie idle for the season or to grow the crop himself, unless his 

 price is met. He will also use his knowledge of market conditions partic- 

 ularly with respect to the profitableness of the relative alternatives open 

 to the producer. However, if only a small acreage is available? the processor 

 may not find it profitable to run his plant because of high unit costs involved. 

 The processor is also aware of the loss ho would probably incur if he did not 

 operate at all, and he will consider the costs of growing the crop himself* 



These factors are uppermost in the minds of the bargainers as they sit across 

 the table from each other. It is extremoly difficult for one bargaining party 

 to know the other party's willingness to strike or resisto The judgment may 

 easily bo incorrect since there are many subjective things in the picture 

 involving not only monuy costs of striking but also such "costs" as unplesant- 

 ness of conflict, loss of public goodwill and the likeo 



In an exceptional catse, a strike may even be considered an asset by one or 

 the other party. On this poi.nt Hicks says, "Weapons grow rusty If unused 

 and a union which never strikes may lose the ability to organize a formidable 

 strike, so that its threats become less effective c" 8/ Thus the cooperative 

 may have to try out its weapon occasionally to demonstrate its effectiveness* 

 Also, if the processor feels fairly certain that the cooperative is unable 

 to hold its membership in lino, ho may welcome . a strike as a' chance to reveal 

 the actual weakness of the cooperative* 



If as a result of effective bluffing and counter-bluffing, each overestimates 

 the other's willingness to carry out its threat, it would be fairly easy 

 for the parties to agree upon a price range considerably narrower, each 

 thinking he has- obtained an unusally good "bargain* Within this narrow range, 

 amiable negotiations are possible and the probability of an agreeable price 

 being reach is high. 



8/ Hicks, J j, R« Theory of Wages . MacMillan, London 1932, p. 14-6. 



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