ABSTRACT
This chapter investigates what insights into the relationship between firm and government, and the probable outcome of the relationship, can be discovered from concentration on the bargaining aspect. The essential feature of a bargaining situation is thus that there is interdependence or interaction between the decisions of the actors involved. The classic context in which economics faces the problem of bargaining is bilateral monopoly, and particularly firm-labor union negotiation, viewed as bilateral monopoly. Economists trying to model bargaining tend to focus on trying to provide determinate outcomes, and hence have built relatively mechanistic models which do not delve deeply into how choices are made or expectations changed. The political opposition, workers’ groups, newspapers, individual ministries or agencies of government, may have specific interests in the outcome of the bargaining that cannot be ignored by the negotiators for the less developed country government.
