Sannarrs and groi.v r ors like to complete contracts well in advance of the 

 planting season, and it is during this period which the bargaining usually 

 takes piece. The longer the cooperative can hold to the threat of with- 

 holding all or a major parr of the supply of raw products, the more likely 

 the canners are to agree to higher prices,, In effect, both sides bring 

 into play their bargaining power from the time one canning, season ends until 

 a contract is signed for another,, The deedlino is the planting period. 



Assume in a particular area all the processors form a committee to bargain 

 with the raw product producers and all the raw product producers have joined 

 together in a bargaining cooperative, and now these two part. ie's, the proc- 

 essor and the oroducer representatives face each other across the bargaining 

 table . 



The processor is interested in obtaining the right to contract with the 

 individual members of the cooperative for an acreage which will yield 

 a season's pack in line with his anticipated market demand, and at the 

 lowest price possible considering quality of raw product desired. He will 

 also have a price above which he will not go because to do so would leave 

 him no margin to cover the costs incurred in canning the season's pack. 



Facing the processor is the bargaining cooperative and it is interested 

 in having the processor agree to take the needed acreage at the highest 

 possible price c The cooperative will also have' in mind a price below which 

 it will not go because its members will have more profitable alternatives. 



In this type of bargaining each party threatens to withhold, their product 

 or services from the other. The processor says he will not contract any 

 corn at the price offered by the cooperative, and in turn the cooperative 

 refuses to allow its members to contract with the orocessor unless its ri>ice 

 is met. In effect each party judges the other [s bargaining position and 

 the prices- each would be willing to accept at any given time during the 

 bargaining process. Customarily the opening price in the bargaining process 

 is based partially upon the last season's price with the processor's offer 

 perhaps under the past year's price and the cooperative's offer some above 

 last year's price. Within this range bargaining takes place and agreement 

 is reached at a price unsatisfactory to both, and yet at the best price 

 each side thinks oossible in light of hie: respective bargaining power. 

 For example, if the cooperative demands a price above the price determined 

 at the bargaining equilibrum, the processor will refuse it if he correctly 

 concludes that the cooperative is unwilling to withhold acreage in order 

 to obtain this price « If the processor demands a price below this equilibrum 

 price the cooperative will refuse it if it correctly judges the unwillingness 

 of the processor to carry out his threat. The two bargainers will get to- 

 gether at a price where each, judges the other would be unwilling to make any 

 further concessions. At whatever point price negotiations begin, assuming 

 correct assumptions' on the Dart of each concerning the others positions, 

 they must end at a price which correctly reflects- .the relative bargaining 

 strength and skill of each, /f, this point each concludes that the other 

 would be willing to carry out his threat rather than make any further price 

 concessions. As Nicholls says, "This orice will be reached by a special 

 form of higgling - by threats, not by competition," 7/ 



7/ Nicholls, Wm. IT. Imperfect Competition Within Agricultural Industries, 

 Iowa State College Press. 194-1 P. 174 



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