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Managerial Economics

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Managerial Economics

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Managerial Economics.

With the growing risk issues in the market industry, the stakeholders of several companies have different objectives and preferences that submit them to negotiations. Bargaining is essential, and this paper aims to show how managerial economics deals with bargaining and impatience among people in real life.

Negotiations have been evolving with time since there are efforts by individuals or society to respond, reduce, prevent, and control the risks that they are involved in the business, and this changes how we deal with uncertainties. Even when there are conflicts from various organs of the society and organizations or the government, it opens room for negotiations. These real-life events we are going to view them from an economic point of view.

Various events open room to negotiations in a real-life, and there are potential solutions that address both benefits and failure of the society. In-game theory, we will see on how technological risks opens a central role for bargaining. Since risk can’t just be avoided, it means negotiations can best solve the situation, and discussion is essential for both resolution and agreement on conflicts to come up with prevention measures, compensation, protection, and liability.

A real example is when striking a bargain in a technological risk in a pipeline deal where company A wanted to route gas from cutting across a land that is owned by person X. the landowner agrees to lease his land. Still, in return, he was supposed to be paid. Here there is only one room for negotiations, and it only on the price before the deal is concluded. Bargaining and negotiation go as follows. Company A processes the price offer, which can make the owner of the land to either accept the offer or deny the offer or even top negotiate the price or counter the offer. The process will end only if both parties agree on the price, and the landowner receives the leasing fees, and the company is given the right to use the land.

In case of a case where there are no compromises, rent won’t be given to the landowner, and there will be no routing of the pipeline by the company as earlier planned. The bargaining process is now always simple since there are things to consider that include the risk—gas in an inflammable material which could cause accidents that damages properties. Before reaching into an agreement, need such analysis. Risk potential adds complexity in agreements for the following reasons; the perceptions of risk differ between different parties, and the level of know-how on the potential damage differs from the individual.

The landowner also receives another offer from person Y to use the land for a different purpose that is not hazardous but will to only rent the land at $400,000 while person X was willing to feel him $500,000. This means both are potential buyers and are interested in doing trade. The landowner now values his land between $500,000 and $ 400,000 from the lowest bidder. If he decides to send the land, that will be the figures that his land will be on. They both have a common interest in doing trade with the landowner, but they have conflicting interests in the prices and the usage of the land. The landowner would want to trade higher, but the buyers have low prices to offer. They will then decide on the negotiating factor on discussions to see how he will get the price raised form the highest bidder.

When there are two or more players in a business who have common interests to co-operate in buying something but have different interests in how they should co-operate, it opens a room for discussions.


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