By Ekpen James Omonbude (auth.)
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Extra resources for Cross-border Oil and Gas Pipelines and the Role of the Transit Country: Economics, Challenges, and Solutions
An understanding of bargaining situations is fundamental to the development of the economic theory of markets (Muthoo, 1999). The main problem that confronts the parties to a bargaining situation is the need to reach agreement over exactly how to cooperate. Each party/ player would like to reach some agreement rather than to disagree and not reach any agreement (although it can be argued that it is possible for a party not to enter into agreement at all); however, each would also like to reach an agreement that is as favourable to it as possible.
If both parties are equally risk-averse, ceteris paribus, then they are likely to split the surplus equally. 3, good X could be a computer. Improvements in technology, such that there are newer, cheaper, more efficient versions of X, mean that B could go elsewhere to purchase it. B, therefore, has more bargaining power. The scenario can also be reversed. If X is property, for example, and property prices go up in a booming market, A can sell elsewhere, thus shifting bargaining power to A. 1007/978-1-137-27433-5 The Role of Bargaining 43 The key principle here is that a party’s bargaining power is higher the higher is his payoff following the occurrence of the exogenous and uncontrollable event that triggers a breakdown in the negotiations.
One of these outside options is no pipeline running through its territory at all. This is most applicable to the pure transit country. The transit country – on the basis of the argument that it will not be worse off without the pipeline – can exercise its outside option to enhance its bargaining power in negotiating the transit fee. The other outside option available to the transit country is for it to participate as a transit route for another pipeline project. Again this is a ceteris paribus condition.
Cross-border Oil and Gas Pipelines and the Role of the Transit Country: Economics, Challenges, and Solutions by Ekpen James Omonbude (auth.)