AB ST RAC T

THE DETERMINATION OF PRICE BY NEGOTIATION

IN AGRICULTURAL MARKETS
by David Hollingsworth Spaeth

It is the objective of the dissertation to form a simulation model
of the exchange of property and the processes of bargaining and
negotiation.

The attainment of this objective is implemented by construction
of the model, the demonstration of the generality of its application,
and the approach to the demonstration of its simulative properties.
Considerable attention is also given to the semantics of current
economic terminology.

”The model is built on a cybernetic hypothesis of human behavior.
This hypothesis is advanced in the form of the TOTE unit proposed by

Miller, Calanter, and Pribram in their book Plans and the Structure

 

of Behavior (New York: Henry Holt, 1960). This form is extended

 

and modified for the purpose of building the model of exchange process.
The concept of the plan is explicated and extended to include not
only the control of a sequence of activity, but also plans selection
processes and plans formation processes.
The principal derivative of the TOTE form is a model of human

behavior based on a hierarchy of plans.

David Holling sworth Spaeth

Using the postulates of the behavioral model, the exchange
hierarchy is defined. Bargaining and negotiation are described in
formal terms.

The exchange hierarchy is expanded and demonstrated to be
equally applicable to the case where the participant in exchange is a
group of agricultural producers. The formation of price offers is
described in terms of the behavioral model. The sequence control,
plans selection, and information processes are identified in the plans
hierarchy that is the shared plan to determine the terms for exchange
of an agricultural commodity.

The demonstration of the simulative properties of the model is
approached by developing the real world referents for the substantive
terms of the formal model. These referents are identified in verbal
and printed statements of bargaining associations, bargaining asso-
ciation executives, and representatives of processing firms.

The cybernetic hypothesis and the associated concepts of plans
and plans hierarchy are demonstrated as a valid basis for the forma-
tion of a theoretical model that simulates the behavior associated with
the exchange of property.

This model does not view the process of bargaining as an aberra-
tion of the perfect market idealization, nor does it employ the restric-
tive assumptions of the perfect competition model. On the other hand,

the perfect competition model is demonstrated to be a special case of

 

i has...

Cl-ati3‘ \‘

1:14.

David Holling sworth Spaeth

the general model where the conditions defining the stationary state
obtain.

Price agreement is postulated to be the result of the successive
revision of current estimates of the future consequences to non-
agreement. It is further demonstrated under the model that price is
the joint resultant of the plans for valuation of property as executed by
the individual economic actor or group of individuals acting as a single
person, under rules for economic conflict which are defined by execu-
tion of the shared plan that controls the political process.

Price determination is viewed as a function of the expectations
that are embodied in plans. It is asserted that past costs of production
bear on present price determination only via the mechanism of present
expectations about the future consequences of agreement to exchange
at a given price. Price is asserted to function as an allocative
mechanism via the reaction to the de facto distribution of revenues after
the exchange has been consummated.

Procedures are suggested for identifying the referents for the

substantive terms of the model in a specific bargaining situation.

 

A w- .

THE DETERMINATION OF PRICE BY NEGOTIATION

IN AGRICULTURAL MARKETS

BY

David Holling sworth Spaeth

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

DOCTOR OF PHILOSOPHY

Department of Agricultural Economics

1962.

ACKNOWLEDGEMENTS

I wish to acknowledge the extensive assistance of Dr. James D.
Shaffer, thesis director, and Dr. Vernon L. Sorenson, who devoted
considerable time to criticism of the successive drafts. Dr. Carleton
Dennis and Dr. Glynn McBride have contributed from their experience
in the cherry and dairy industries.

Two of my fellow graduate students, Dennis Oldenstadt and Dana
Dalrymple, have been of considerable help in discussing and in sup-
plying data on bargaining and bargaining associations.

Finally, I wish to acknowledge the contribution of time in dis-
cussion and of experiential data by Jack Barnes, General Manager,
Michigan Milk Producers Association, and Noel Stuckman, Market
Development Division, Michigan Farm Bureau Services.

The generous contribution of these men from their knowledge,
time, and experience does not necessarily imply agreement with the
argument and conclusions of this dissertation. Any errors of logic

and data that may be found are mine.

ii

PREFACE

The reader will quickly discover that this dissertation is not an
extensive empirical description of bargains, bargainers, or bargain-
ing associations. Neither is it intended to be a manual of how to bar-
gain. The intent is to construct a way of talking about the determina-
tion of price by means of the social process that is negotiation. This
objective is sought along two lines. First, a model is advanced to
serve as the framework for the interpretation of observed phenomena
in the market. Second, considerable attention is given to the semantics
or word-object relationship, of the economic terminology that is used
in the analysis of market behavior.

A further purpose of this dissertation is to describe price
determination in a manner that does not view its context, bargaining,
to be a deviation from the perfect competition model. This is not in
any sense meant to be a criticism or refutation of the idealization that
is the perfect market. On the contrary, there is agreement. In demon-
strating this agreement by examining a portion of the economic ter-
minology used to explain marketing phenomena, new meaning can be
given to interpretation of economic data, and substance given to some
ill-defined words. It is also demonstrated that the model of bargaining
developed in this dissertation forms a meeting point for the statements

and analysis by the classical economist, the neo-Keynesian, the

institutionalist, and the businessman.
The model developed in the following pages is designed to simu-

late the so-called “real world. "

Hence, the use of examples from
various industries is not intended as empirical "proof, " nor has it
been tacked on as an afterthought to prove a point of argument. The
citing of a limited number of examples is intended to demonstrate iso-
morphism between the model and overt phenomena. Since the primary
concern is simulation, effort is made to find empirical demonstration
of the assumptions as well as the model itself.

Much as paintings of a single subject vary with the painter, word
pictures vary with the writer. Just as one painting does not preclude
the existence of other graphic simulations of the same object, the
approach of this thesis does not preclude the use of other models to
explain the same data. The value of this particular approach, which

is basically inductive, can only be assessed when the model that is

formed in this way is refined and put to work as a deductive system.

David H. Spaeth

iv

Chapter

II.

III.

IV.

TABLE OF CONTENTS

Introduction

The Problem

Approach and Purpose

Bargaining and Negotiation

Process, Plan, and Person

The Plan To Bargain

The Organization of the Dissertation

Plans

The TOTE

Time

Plan Feasibility and the "Value" of Plans
Plan Flexibility

Beliefs and Values

Plans Selection

Shared Plans

The Plan To Negotiate

Further Assumptions

Offers

Time, Consequences, and Games

The Pressures Toward Agreement
Formal Rules for Reaching Agreement
Bargaining Power

The Semantics of Supply and Demand
Costs

Shared Plans To Negotiate
MAP - Plans Integration
Plans Selection (PS P)
Information Processes (LP)

Page

~1U1\O\10\UJ>-

Hg...

19
21
33
36
45
46
50
54

57

57
61
63
73
76
78
86
90
98

103

103
106
110
114

Chapter Page

The Context of Information Flows 121
Summary 123

V. 125
The Demonstration of Simulation 125

Limits to Feasible Price Offers 126
Bargaining Association Goals 134
Summary 145

VI. 147
Summary of Major Statements 147

Public Policy 154

VII. 163
Models 163
Suggestions for Specific Research 168
BIBLIOGRAPHY 179

vi

.I.

LIST OF FIGURES

Figure Page

1. Schematic Representation of the TOTE -- "Drive
Nail" ........................ ‘ .............. 25

vii

THE DETERMINATION OF PRICE BY NEGOTIATION

IN AGRICULTURAL MARKETS
CHAPTER I

INTRODUCTION

The determination of price by negotiations is a part of a more
general process called bargaining. Negotiation has been referred to
in economic literature as that "higgling" in the‘market which leads to
unique association of price with a quantity of specific goods or services
for the purpose of exchange. This bargaining, with its higgling, is a
time-honored procedure for establishing the terms for exchange of
property between individual human beings. This procedure has been
extended to multi-person collective or cooperative bargaining, first,
over terms of employment, now, for the terms for trade of agricul-
tural commodities.

There is no need here to review the history of the development
of cooperative bargaining in agriculture. The literature in the field is
extensive and growing (1). It is important, however, to note that

cooperative bargaining in agricultural markets has become a major

 

(1) See Peter Helmberger, "Cooperative Bargaining in Agricul-
ture, ” unpublished thesis for degree of Ph. D. , University of Cali-
fornia, 1960, for an extensive description of the past history and
current status of agricultural cooperative bargaining associations.

topic for discussion in the formation and implementation of national
policy with regard to the various problems that have been identified
with the agricultural sector of the U. S. economy. As a positive
reaction to the hypothesis that imbalances in "marketing power" are
responsible for undesirably low incomes among farmers, the American
Farm Bureau has formed the American Agricultural Marketing Asso-
ciation. Robert E. Braden, Field Services Director of the newly
formed Michigan Agricultural Cooperative Marketing Association, has
advanced this statement of Farm Bureau policy:

Farm Bureau recognizes the necessity of organized farm
marketing power to maintain financially independent, family
type farms. As the world's largest and most influential farm
organization, Farm Bureau is putting all its energies and fi-
nances behind this voluntary program. It has long been a Farm
Bureau basic belief that farmers can do a better job for them-
selves, than someone else can do for them (2).

Taking a different view of the relationship between cooperative
bargaining and government policy, former Secretary of Agriculture
Henry Wallace has stated:

In the late twenties I evolved the phrase, "The farmers
are entitled to the moral, legal, and economic equivalent of
what the tariff and corporate form of organization give to
industry and labor unions give to labor. ” This meant govern-

ment action. In some way farmers must get equivalence of
bargaining power.

 

(2) Robert E. Braden, ”The Organization of the Michigan Agri-
cultural Cooperative Marketing Association, " mimeo, Michigan Farm
Bureau Services, Lansing, Michigan, 1961.

'1’.“
.5“

{@‘th‘H
,1

~ 5. .-... -

 

 

Cooperatives are good, but they are not enough in days
when most of the farmers' sales are to huge corporations and
most of their purchases are directly or indirectly from great
corporations (3).

There are now more than 325 cooperatives of the bargaining
type (4). Increasing numbers of persons in and out of these associa-

tions and in both private and public agencies are being called upon to

supply data and operational advice to these bargaining associations.

THE PROBLEM

Two problems that arise from this increasing public discussion
of bargaining and marketing power are dealt with in this dissertation.
First, there is the problem of trying to assess the intended meaning
for phrases such as, "full market value, " "fair price, " or "market
power. " These phrases, and others like them, are highly subjective;
hence the intended meaning is primarily contingent on the user. On
the other hand, these kinds of phrases appear as substantives in
statements of organization goals. As such, they may be presumed to
be related to stable points in the complex basis for decision making

that underlies the execution of the group plans to bargain cooperatively.

 

(3) Henry A. Wallace, "Equality of Bargaining Power, " Better
Farming Methods (from the Benjamin Hibbard Memorial Lecture at
the University of Wisconsin, March, 1961), Aug. 1961, p. 14.

 

(4). Kenneth J. Samuels, "Bargaining Activities in Other Commo-
dities, ” Proceedings, 5th Annual Conference on Fruit and Vegetable
Cooperatives, Jan. 7, 8, 1961, mimeo, Farmer Cooperative Serv-
ice, Washington 25, D. C.

The second problem is that of explaining the relationship between
this social process of bargaining and price determination in the theo-
retical sense. Is there some kind of order in this confusion of inter-
personal reaction and interaction that is bargaining? The science of
economics is an old one, developed by eminently intelligent men who
looked at the world around them and made logically consistent infer-
ences about the nature of the economic activity they saw. They formed
theories about the formation of price and the establishment of the
values of commodities and human services. These theories have been
called right, wrong, valid, or unrealistic. ”Rightness" or "wrongness, "
however, are not properties of theories, nor is realism a necessary
property of theories. Theories are valid or invalid depending solely
on their internal logical consistency. It is a basic premise of this
dissertation that there should be a link between static economic theory,
as currently expounded, and alternative models for interpretation of
human economic behavior since there is a common basis in the overt
human behavior that furnishes the data for inferences. This thought is
not pursued to the extent of reviewing all of economic theory in relation-
ship to the model developed in this dissertation, but it is the basic
approach in dealing with the concepts of supply, demand, cost, and
profit maximization.

There is a further gain in probing the semantics of economic

terminology. As theories gain wider and wider acceptance, their

terminology becomes the means for communication between re search-
ers. The interpretation of human economic behavior is the subject of
several theories, both in and out of economics. To the extent that
this economic behavior is the common basis for these theories, prob-
ing the semantics of terminology should facilitate communications
between groups of researchers. Further, the person who survives
in the business world also interprets human behavior, forms his own
system of inferences as a basis for his decisions, and uses the ter-
minology of economics rather freely. Improvement in communications
between the professional economists of various schools of thought and
the business community, including farmers, is of particular impor-
tance. Hence, the intended meanings of the words in the bargaining
context as used by producers and their representatives will also
receive attention.

A further problem that arises out of the relationship between
the social process of bargaining and price determination is the matter
of the theoretical determinacy of price in a situation where the ex-
changers have some control over price by variation of the quantity
or specifications of the property exchanged. This is the "oligopoly
problem, " or the problem of price determination under perfect or

monopolistic competition that is the subject matter of the writings of

mix—.3

 

L

 

 

Robinson, Chamberlain, and Fellner (5). Fellner observed that prices
were agreed upon, and in many cases displayed considerable stability.
His explanation, however, leaves such concepts as the sanctions
imposed on affluence, toughness, retaliatory power, and the costs of

stalemate, to be further explained and formally defined (6).

APPROACH AND PURPOSE

This dissertation approaches the problem of interpreting the on-
going phenomena of bargaining and negotiations by starting from
postulates about the form of the behavior of human beings in general--
first, as individuals aware of their group membership, then as groups
of individuals.

Although it is essential that the internal logical consistency of
the model be maintained, the prime objective is simulation (7). This
is basically an inductive procedure, apart from but not unrelated to

subsequent use of such a model as a deductive system. Although such

 

(5) Edward H. Chamberlain, The Theory of Monopolistic Compe-
tition. London: Oxford University Press, 1947; Joan Robinson,
Economics of Imperfect Competition. London: The Macmillan Co. ,
1948; and William Fellner, Competition Among the Few. New York:
Alfred Knopf, 1949.

 

 

 

(6) These phrases approximate Fellner's four "factors" to which
he attributes de facto determinacy in the real world. Fellner, op.
cit.

(7) For a discussion of simulation models as models of dynamic
process see. William H. Starbuck, "Testing Case Descriptive Models, "
Behavioral Science, VI, 3, July 1961, pp. 194-195.

 

mg.) .d‘ " .3:

4-

 

 

 

simulation models are “realistic, " their evaluation must be based on
their explanatory and predictive power as deductive systems.

In summary to this point, and more specifically, it is the pur-
pose of this thesis to:

1. Describe the process of bargaining, its component negotia-
tions, and the context in which these take place in agricultural mar-
kets. This description is implemented by the use of a formal model
adopted from the fields of psychology and cybernetics with particular
emphasis on the semantics of the substantive phrases used in the
model.

2. Relate price determination by negotiation to price deter-
mination in the theoretical sense.

3. Demonstrate, in a limited way, the use of case descriptive
materials in the formation of simulation models, and in association

with this, explore the semantics of some current economic terminology.

BARGAINING AND NEGOTIATION

The word bargaining, as it is used here, refers to the process
of attempting to reach agreement on terms for the exchange of pro-
perty. Bargaining is subordinate to, or a means for achieving, the
exchange of property. Property is defined within the legal framework

in which the exchange takes place. To differentiate the word

r14

""3

 

 

bargaining as it is used here from the term "bargaining transaction"

used by Commons(8)and, to avoid undue emphasis on the legal aspects
of property, it is assumed that property is defined. It is also assumed
that price means a ratio of exchange in which the numerator is money.

The word negotiation refers to the exchange of messages that is

 

part of bargaining and a means for eliciting counteroffers. The dif-
ference that is being made here between bargaining and negotiation is
a matter of the hierarchical organization of human behavior that is
postulated in Chapter II. It is sufficient for the moment to state that
bargaining is interpreted as the general process of seeking agreement
of the terms for exchange and includes cases of non-negotiated exchange
and the unilateral setting of terms. Negotiations is interpreted to
include among counteroffers, ultimatums and take-it-or-leave-it
offers (9).

The interpretation of bargaining as the general case of reaching
or attempting to reach agreement is a different point of orientation

than the usual view of bargaining as an aberration of the perfect market

 

(8) John R. Commons, The Economics of Collective Action. New
York: The Macmillan Co. , 1950, p. 44.

 

(9) The inclusion of non-variation of repeated offers, and ulti-
matums in the definition of negotiations is at variance with common
usage. The refusal to yield on a given variable in the terms package
usually designates that variable as being "non-negotiable. " This in-
clusion is made, however, to avoid dealing with the problem of ulti-
matums that, in retrospect, are not so ultimate.

 

4:1.

 

idealization. The most general case of attempting to reach agreement
on the terms for trade is exemplified by an auction in an unorganized
market, such as a rural auction of used household furnishings. In this
context, the perfect market appears as the special case where the
assumptions of perfect knowledge, fixed preferences and institutions,

and homogeneous product obtain.

PROCESS, PLAN, AND PERSON

A basic statement for explanation in this dissertation is that
bargaining is part of a social process in which two persons converge
on a single point of communicative contact with the plans and authority
to exchange property.

This statement is not at variance with the statement by Com-
mons that there are five parties which are participants in the "bargain-
ing transaction" (10). Commons talks about two actual participants,
two potential participants, and the sovereignty imposed by the fifth
representing the general public. The two persons in the initial state-
ment above, are Commons' actual participants. Sovereignty has
already been accounted for in part by assuming that property has been
defined. It will be seen that this assumption can be dropped and the

assertion made that the definition of property is the result of group

 

(10) Commons, op. cit., p. 50.

10

plans to stabilize the environment as executed by the political group--
the government. The two potential participants to the bargaining
transaction are represented in the model of this dissertation by not
only competitors, as Commons asserts, but by the next most feasible
alternative to exchange with this particular opponent. This may mean
exchange with a competitor to the other person faced in the market.

It may mean abandonment of the decision to exchange.

Referring again to the initial statement of this section describ-
ing bargaining, a convenient vehicle for the discussion of bargaining
and its context is development of meanings for the words process,
pl_a_._n and person, which occur in the statement. The concept of the
212 and the postulates formed from it are the subject matter of
Chapters II and III. Person is tentatively designated as the participant
in exchange. Chapter IV is devoted to developing the case where the
person is a group of individuals faced with the task of behaving as if
they are a single economic actor. That is, they are faced with the
task of forming a single unambiguous offer which can be accepted by
the other person.

The development of a meaning for the word process does not
contribute directly to the formal description of bargaining. It does,
however, indicate the nature of the job faced by the describer. The
word process, as it is in this dissertation, refers to the following

concept described by Berlot

11

If we accept the concept of process, we View events and
relationships as dynamic, on-going, ever-changing, continuous.
When we label something as a process, we also mean that it
does not have _a_ beginning, _afl end, a fixed sequence of events.

It is not static, at rest. It is moving. The ingredients within

a process interact; each affects all of the others (11).

Bargaining is a process. The task facing the describer is to
break this amorphous on-going event into segments and attach labels
to these segments in order that this process can become the subject
of discussion and orderly inquiry.

The so-called "real world" is also a process, perhaps the most
comprehensive process with physical overt evidence of its existence.
It too is on-going, ever-changing, without _a beginning and _a_n end, and
composed of interdependent and interacting parts. About all one can
say is, that things in the real world ”happen” in sequence. Human
decision makers, via sensory apparatus, sense this real world. The
human mind seems capable of inferring cause from observing sequences
and building systems of "what causes what, " or, private theories about
the nature of the environment within which the individual must exist
and survive. Using this ever increasing private theoretical system as
the frame of reference, new experiences are interpreted which are

classed as "facts" and which further alter the private world of "what

causes what. " These are necessary functions for survival.

 

(11) David K. Berlo, The Process of Communication. New York:
Holt, Rinehart, and Winston, Inc., 1960, pp. 23-28.

 

”or "

_h‘uu

“lax-«JD 1L:

 

 

12

Bargaining is a process involving interaction between human
decision makers. Part of the data to each is the interpretation of the
overt behavior of the others. They interact. Just how each person
in exchange interprets (makes inferences from) the behavior of the
other has a profound influence on the course of negotiations. This
description of bargaining as a process indicates the meaning intended
when the word "dynamic" is applied to the bargaining model that
follows. Dated variables or sequences through segmented time are
not sufficient to warrant the use of the adjective dynamic. The
economic actors must interact as each uses the acts of others as a
basis for his own actions.

The use of the concept of process and the idea that each element
of the behavioral system called "bargaining" interacts with all of the
other elements, raises the question of whether or not there is any
determinacy in the system. To put it another way, since there is
some determinacy in interpersonal reaction (bargains are concluded
and exchanges made), how can a theoretical system describe a process
with its indeterminacy and still account for points of stability and the
degree of certainty that does exist? To put it in still other terms, if
a system of three elements was set in motion with the behavior of each
contingent on the behavior of the other two, how would one go about

describing the approach of these elements to a particular spatial

c onfi gur ation ?

13

The concept that is used to explain one such configuration, agree-
ment on price, is the plan to bargain. The solution to the bargain is
not apparent with 100% certainty to the persons who are participating,
but the need to exchange forces these economic actors to choose a spe-
cific course of action. Once embarked upon, this course of action may
or may not be revisable in the face of change in the on-going environ-
ment. Some parts of the plan of action may not be spelled out until
certain information becomes available. This course of action, the
plan, is the basic unit that is used for the description of process. Plans
occupy time, and they involve learning. The basic assertion is simply
that in the face of the complex interaction which is the real world as
sensed by the individual, people form plans on the basis of the
inferences about cause, and the data available at the time. In other
words, even though the individual cannot analyze all of the consequences
of a specific course of action, survival dictates that he must choose

some course of action. Some plans are to act as individuals. Some

 

plans are formed by groups, that is, they are shared plans to achieve
group goals. It is asserted that the determinacy that is observed in
the real world arises because the pressure to predict and plan engen-
ders participation in shared plans to stabilize parts of the real world.
It will be demonstrated that these shared plans can be derived from

postulates about the nature of individual behavior.

14

The notion that price formation is the "discovery" of some pre-
determined point of supply and demand equilibrium is rejected in its
naive form. The process of bargaining itself is price determining.
This does not mean that there is no stability or there is no
point of orientation in the environment to serve as a basis for price
formation. The question is clarified by consideration of possible

meanings for the word equilibrium in the dynamic context. First,

 

there is equilibrium that would be achieved in a world where all
expectations are met. All plans are coordinated, fully specified
from the beginning, and successfully executed without revision. This
is the stationary state cited by Hicks(12). Second, there is equilibrium
in the sense of a limiting position in the case of recurrent plans.
Constant correction of errors in each repetition would yield accuracy
and predictability approaching that of the stationary state. It can be
hypothesized that the presence of recurrent production plans carried
on by many uncoordinated firms in agriculture has tended to make
propositions derived from static economic theory look realistic and
appropriate when applied to interpretation of economic behavior in

agriculture.

 

(12) J. R. Hicks, Value and Capital. London: Oxford Univer-
sity Press, 1939, p. 117.

 

15

Third, there is the situation where a steady state is maintained
because any deviation from this state is met by reaction to restore it.
This is the concept of homeostasis and the appropriate meaning for
equilibrium in describing the process of bargaining. An example of
homeostasis in economic behavior is cited by Boulding:

We thus visualize a firm as a "homeostatic" process by
which a certain structure of variables is maintained. At the
simplest level we suppose there is "homeostasis" of the balance
sheet; on this assumption any change in the balance sheet
variables will evoke counteracting behavior.

This theory does not, of course, carry us very far,
as we have to ask first what determines the balance sheet that

is maintained, and secondly we have to account for the changes

in the balance sheet, both in over-all growth and in composition
(13%

Homeostasis, when related to human behavior, is interpreted as
steady state that is purposefully maintained. It is necessary to as-
sume that decision has preceeded action. It is also necessary, as
Boulding indicates, to explain the underlying purpose for the mainten-
ance of the steady state, and the mechanism for change. This explana-

tion is advanced in the following chapters.

THE PLAN TO BARGAIN
The usual purpose for description in economic analysis is to

implement explanation. It is the usual purpose of explanation to

 

(13) Kenneth E. Boulding, "The Present Position of the Theory
of the Firm, " Linear Programmingand the Theory of the Firm.
(Boulding, K. E. and Spivey, W. A. Eds.). New York: Macmillan Co.
1960, p. 13.

 

16

implement prediction and control. It is a reasonable assertion that,
apart from the desire to engage in economic conflict per se, if the
point of final agreement in a bargaining situation could be accurately
predicted by both sides from the initial information, negotiation
would be precluded as a means to reach agreement on the terms for
trade. There would be no need to bargain in order to reach agree-
ment. In the absence of such certainty, and if an agreeable set of
terms is not indicated among the data or facts in the exchange environ-
ment, the means to achieve price agreement is the plan to bargain.
This plan to bargain combines the world of facts, as seen by the bar-
gainer, with his private theory about "what causes what, " to form a
specific course of action. The formation of this specific course of
action may involve selecting a single sequence or plan from a finite
set of plans, the purpose of each being to reach agreement on the
terms for trade. Negotiation is said to follow as a part of the plan
to bargain if the person decides to attempt to elicit a counteroffer.

The approach to prediction of the course of negotiations and
the nature of the ultimate solution is made from two directions. First,
the environment is examined for limits to the range of acceptable
negotiated offers for each person. Second, the behavior of the
negotiating person is examined to locate points of stability that furnish

the basis for rejection, acceptance, and formation of offers.

17

THE ORGANIZATION OF THE DISSERTATION

Chapter II, as indicated above, advances the postulates about
individual and group behavior. The result of this is to describe the
nature and property of M. The plan is the central concept permit-
ting the use of the word dynamic as descriptive of the model that is
advanced in this dissertation.

Chapter 111 describes the formal model of bargaining that is
based on the postulates of Chapter II.

Chapter IV describes the shared piap to bargain cooperatively
as executed by a group of individuals. The text deals with the internal
communications and decision processes within the group that leads to
the formation of the single offer. The shared plan, in effect, is a
model for the political processes which reconcile the multiple in-
terests within the group.

Chapter V reports the statements made in both interviews and
in publications by persons responsible for bargaining for primarily
producer groups. The purpose of the chapter is to demonstrate
referents for the substantive terms in the formal model that is built
in the preceding chapters.

Chapter VI summarizes the major hypotheses of the disser-

tation and explores the implications of these hypotheses.

18

Chapter VII makes specific suggestions as to procedures for
identifying the referents for the substantive terms of the model in a
specific bargaining situation and the testing of hypotheses that may be

deduced from the formal structure of the model.

CHAPTER II

PLANS

An essential problem in moving from the consideration of static
to the consideration of dynamic models of price determination is in
moving from the description of the conditions under which price
equilibrium will obtain to the description of attainment of a price.

Parsons has commented on the work of Commons stating:

In his investigations into "reasonable value, " Commons
concentrated upon the analysis of court decisions, but his pur-
pose was even broader than the study of his legal theories of
valuation. He was searching for a laboratory in which to study
the operation of the human will, upon the most difficult prob-
lem in social thought-~the achievement of joint valuations and
agreements for action in situations involving genuine conflicts
of interest (14).

The key phrase for discussion here is "the operation of the
human will, " and its association with “the achievement of joint valu-
ations and agreements for action. " This search for a link between
awareness or knowledge and action is not confined to theories of
valuation. Miller, Galanter, and Pribram cite the absence of
psychological theory that deals with the human will stating, in
criticism of the cognitive theorist:

It is so transparently clear to them (the cognitive theor-

ists) that if a hungry rat knows where to find food—-if he has
a cognitive map with the food-box located on it--he will go

 

(14) Kenneth H. Parson, "Introduction" to John R. Commons,
Economics of Collective Action, op. cit. , p. 10.

19

20

there and eat. What more is there to explain? The answer, of
course, is that a great deal is left to be explained. The gap
from knowledge to action looks smaller than the gap from
stimulus to action--yet the gap is still there, still indefinitely
large (15).
The variation on this problem that is of relevance to the determination
of price is the leap from the collective and individual knowledge of
market conditions, to the formation of the offers that are the pre-

conditions for the consummation of the exchange of property.

To fill this gap between knowledge and action, Miller et a1.

 

propose the E:

. any hierarchical process in the organism that can
control the order in which a sequence of operations is to be
performed (16).

It is a basic postulate of this dissertation that bargaining is
such a controlled sequence, which aggregates ”knowledge" into a
sequential action for the purpose of reaching agreement on the terms
for exchange of property. This definition of the plat—n requires the
explanation of the phrase "hierarchical process. " The appropriate

approach to this explanation is to consider the basic behavioral unit

called the TOTE that is proposed by Miller and his colleagues.

 

(15) G. A. Miller, E. Galanter and K. H. Pribram, Plans and
the Structure of Behavior. New York: Henry Holt and Co. , 1960,
p. 9.

 

 

(16) Miller et a1. , op. cit. , p. 16.

21

THE TOTE

The name TOTE refers to the sequence Test-Operate-Test—Exit.
This is a basic unit of behavior that is proposed to replace the tradi-
tional reflex arc concept that underlies stimulus-response theories of
human behavior.

Any theory of human behavior either at the human or animal
level must explain the reaction of the organism to its environment.
Behavior that takes no cognizance of the environment leads almost
certainly to the destruction of the organism. The body of psycho-
logical theory, which is identified as the stimulus-response school,
usually describes the neural structure of the organism as being linear.
The chain of elements called the ”reflex arc” consists of: stimulus-
receptor-afferent nerve-connective fibers-efferent nerve-effector-
response. The feedback control on behavior is implemented by an
assumed, but relatively unstructured, concept called "re-enforcement. "
This re-enforcement embraces the explanation of the association of
particular stimuli with particular responses. The explanation of
how these associations are established, extinguished, and changed,
plus the explanation of why a broad range of stimuli can elicit similar
response, and vice versa, has led to the postulate of the organism as
the intervening variable between the stimulus and the response. It is

postulated that there is an intervening organism that "takes account of''

22

the stimulus and selects the correct response. This of course
leaves for explanation the nature of the intervening organism. This
"little black box" is called the locus of "meaning" by Osgood who
attempts to structure it by factor analysis (17).

Miller and his colleagues assert that evidence from a number
of sources indicates that a more appropriate description of the
mechanism of behavior than the reflex arc can be found in a cyber-
netic or feedback controlled unit analogous to an information pro-
cessing unit in an electronic computer.

The cybernetic behavioral sequence occurs in this order (18):

1. A stimulus is received such that a comparison in the Test

 

phase of the behavioral unit indicates a discrepancy between the
present state of affairs and another state that is desired. This

discrepancy, called incongruity, leads to the passing of con-

 

trol to the gerate phase of the behavioral unit.

2. An activity sequence of subordinate TOTE's is executed

for the purpose of eliminating the incongruity. When this

 

(17) C. E. Osgood, G. J. Suci and P. H. Tannenbaum, The

Measurement of Meaning. Urbana: University of Illinois Press, 1957,
see Chapters 1 and 2.

 

(18) The TOTE unit is borrowed from Miller, Galanter, and
Pribram and extended for use in this dissertation. This, however,
does not imply that these extensions would meet with their approval.
The postulation of separate learning and plans selection hierarchies
are only suggested in their text. See Miller et a1. , op. cit. , p. 18
and footnote, p. 37.

23

sequence has been completed, the control passes back to the
Test phase of the unit which has received information con-
cerning changes in the state of the organism, then,

3. the Test is repeated. If incongruity is still present, the
control passes to Operate and the sequence is repeated. If
incongruity is not detected, then an §x_it is made from the unit.

That is to say, the control passes to the next TOTE unit.

Thisis the basic form proposed by Miller 32.1. and it is overly
simple, as they recognize. The extension and modification of this
basic TOTE may be pursued by posing three questions. First, what
happens if the attainment of the complete elimination of all incongruity
is impossible by any known operation? To answer this it is necessary

to propose criteria for Exit, or stop rules on the performance of this

 

particular TOTE. To avoid a cumbersome system of stop rules to
cover any and all contingencies, it is proposed as a modification of
the third step above that when the control returns to the Test phase,
the following three alternatives are possible.
3. The Test is repeated; then:
(a) if incongruity still exists, control passes back to the
Operate phase and a sequence is performed to eliminate

the incongruity, if such a sequence exists.

 

(b) if incongruity still exists and no sequence exists which

24

will eliminate the incongruity, then Exit from the TOTE.
In other words, the TOTE is abandoned for lack of feasible
sequence.

(c) if no incongruity is detected then Exit from the TOTE.

A TOTE of this form is represented schematically in Figure 1.

It is seen, then, that the stop rule is contingent on the non-
existence of incongruity, or, some sort of test applied to sequences
indicating that no sequence exists that can be expected to eliminate the
incongruity. This introduction of expectations into the scheme is
involved in the second question that needs to be answered in order to
render the TOTE useable for explanation. This question is whether or
not only one sequence is associated with the operation phase of a TOTE.
It is proposed that the Operate phase contains a list of alternative
sequences and that there is a selection of one of them on the basis of
expected capacity to eliminate incongruity.

To phrase this a little differently, when control passes to the
Test phase of a TOTE there is an immediate resort to a choice process
in which the attempt to eliminate incongruity is repeated, abandoned as
unfeasible, or, is unnecessary if the Test indicates that no incongruity
is present. This implies the presence of a choice mechanism and the
existence of some procedure for establishing the feasibility of alternative

plans. The most obvious rule is to consider maximum expected

25

 

 

 

TEST EXIT

Value: Nail head should Stop Rule: Exit if
be flush with surface Nail head is flush with

surface (no incongruity)
Belief: Nail head protrudes

or
Since belief and value do
not agree, control passes Nail is bent (repetition
to the Operate phase is not feasible)

 

 

I

 

OPERATE
(The plan to drive a nail)

 

 

 

 

 

 

 

 

 

 

 

 

TEST EXIT ' TEST EXIT
Hammer up Exit: if Hammer down Exit: if
v, hammer -—> v. hammer
hammer down is up. Hammer up is down.
OPERATE OPERATE
Raise hammer Strike nail

 

 

 

 

 

 

 

 

(How the nail is struck or the hammer is raised is postulated to be un-
der the control of even more molecular TOTE's (not shown) in the
Operate phases of the TOTE's "Raise hammer" and "Strike nail".)

FIGURE 1

Schematic Representation of the "TOTE" - "Drive Nail"

26

incongruity reduction to_ be the criterion for choice. This follows the
form of the non-additive subjective expected utility maximization
(NASEU) models proposed by Edwards (19). This model is appro-
priate for other reasons that are cited later in this chapter.

The third question related to extension of the TOTE is, what is
the nature of the mechanism by which the knowledge of the current
status of the organism is modified to indicate the results of the
Operation? The implication is made in the very simplest form of the
TOTE that all of the change is the result of the Operation sequence.
If this model is to simulate human behavior, this need not be true.
The elimination of the incongruity could be implemented by:

1. execution of a successful sequence.

2. a shift in the specifications of the desired state.

3. a shift in the status quo arising from circumstances or

actions not related to the activity of the individual.

4. some combination of the above three bases for change.

It is proposed that in addition to the sequential passing of control,
and a choice procedure, that there is an information-processing activity

that bears on the change in the "knowledge" of "what is, " "what should

 

(19) Ward Edwards, "Measurement of Utility and Subjective Proba-
bility, " Psychological Scaling: Theory and Applications (Gulliksen, Harold
Messick, Samuel, Eds. ). New York: John Wiley and Sons, Inc. , 1960, pp.
109-127.

 

27

be," and "what can be" in the Test phase of the TOTE unit. This shift
in "knowledge" can quite reasonably be called learning.

To clarify the TOTE concept in the form that has been proposed
above, it is necessary to affix some labels. Perhaps the most difficult
of the notions is that of incongruity. It is postulated that a part of the
information held in the Test phase of a TOTE is the organized per-
ception of "what is" (20). This shall be called the belief system; the
system of "facts" held by the individual. It is further postulated that
in juxtaposition to this belief system is a value system containing the
notions held by the individual about "what should be. " These are the
actual and potential goals for the individual. Incongruity can then be
defined as that internal state of the organism that arises when corre-
sponding elements of the belief and value system differ. As Miller _e_t
_a_l. imply, this incongruity can arise from the need for nutrients
(belief; don't have v. value; should have) in the cellular structure, or,
can arise at the broadest social level (the Mayor is a Democrat, v.

we should have Republican Mayor) (21). The belief system as defined

 

(20) The belief system that is postulated is closely related to
the Image as proposed by Boulding. It includes such "facts" as the
present estimate of future states. It is the sum total of all organized
information or knowledge held by the individual. See Kenneth E.
Boulding, The Image. Ann Arbor: University of Michigan Press,
1956.

(21) Miller et a1. , op. cit. , p. 82.

28

herein does not necessarily imply mental process in the ordinary
sense. It is the more general "is" side of all postulated Test phases
of TOTE's.

Similarly, the value system is considered in its broadest sense
as the "should be" side of all Test phases.

To this point, the Operate phase has been simply called a
"sequence. " It is now postulated that such a sequence is a sequence
of subordinate TOTE units. A sequence of subordinate TOTE's con-
tained in a TOTE operate phase, that is directed toward a specific
goal, is called a fix}; To specify a particular plan, one must indi-
cate the purpose for which it is selected to be executed and the anti-
cipated time span or length of run. It may be seen then that plans
contain TOTE's as units of behavior, and that a plan is contained in
the operation phase of a TOTE. This "larger" TOTE may in turn be
a unit in some larger or higher ordered plan, and so on up to the
longest run and most comprehensive of plans and TOTE's. This is
the meaning of "hierarchical process" that appears in the definition of
the plan.

A more concrete example will illustrate the notion of the TOTE
hierarchy. Suppose that the largest or highest ordered TOTE that is
to be considered is the very generalized behavior directed toward a

Mr. Jones occupying the role of farmer. He knows from experience

29

what he should do to fill the role. He also knows that he lives on a
farm, and the consequences of doing nothing (present estimate of a
future state). To fulfill the role he executes the plan to farm for the
coming year. Which farming plan he choses is contingent on his
knowledge of the farm and other assets and inputs at his disposal.
Say that Jones knows that he has an orchard and in response to the
value "should earn income" he chooses to operate the orchard. As
soon as the orchard enterprise is included in his annual farm plan,
he embarks upon a sequence of operations, one of which is to sell the
crop. When the time comes such that he "should" exchange the crop
for money, he selects a plan designed to achieve that end. Among
the TOTE's in the sequence of the plan to exchange the crop, say
apples, for money, is the TOTE whose value system specifies that
apples should be exchanged at the rate of $3. 00 per bushel for a
specific grade. The purpose of this TOTE is to reach agreement on
price. The value is the price Jones thinks he should get, the belief,
or fact, is the price that he is faced with when the sequence to exchange
apples for money has proceeded to the point where Jones receives the
first information on the price that he can accept for his apples. Sup-
pose now that the market price is $2. 50. The resultant incongruity
then leads to one of three actions. He can revise his value aboue the

price he "should get. " He can infer that he cannot reach price agreement,

30

turn around and go home or to another market, or, he can choose a
plan to elicit another offer. This last alternative means the selection
of a plan to negotiate, that is, elicit a counteroffer. The plan to
negotiate is a sequence of TOTE's which include seeking out a buyer,
manipulating the context of negotiations, and in particular, a unit
directed at making an offer. Even further, there are the subordinate
TOTE's related to how the offer is made down the hierarchy to the
physiology of the speech organs.

The hierarchy is evident in the above example. It is also
evident that since both plans and TOTE's are designated by their
purpose and time span or horizon, that TOTE's can be designated by
their plans. The discussion to follow will use the convention of
speaking of plans and the reader need only keep in mind that the
motivator behind the execution of the plan is the belief v. value
discrepancy of the TOTE. The TOTE will be mentioned where
necessary to clarify a point in the bargaining model. As an example
of the procedure for using the word plag; the plan to sell the 1962
output of Jones. Orchard, includes the sub-plan to reach price agree-
ment with a buyer, which may include the sub-plan to negotiate. The
sales plan itself is a part of a larger plan to implement the farm
income, which in turn is a sub-plan with respect to the long range

goals of the Jones family. To repeat, to talk about a plan it is

31

necessary to specify the goal or purpose and the time horizon. This

 

is the procedure for segmenting and labelling the amorphous process --
the plan.

As an initial statement, plans are asserted to have the following
properties:

1. They include sequences of sub-plans.

2. They require a time period for execution.

3. They are based on expected outcomes.

4. They are executed for a purpose.

5. They can be abandoned or revised.

6. They are related to other plans by hierarchical organization.

It is convenient to talk about levels in a plans hierarchy asso-
ciating, in general, the longer time horizon with the higher ordered plan.
It follows from the postulate that the passing of control from Test to
Operate involves a selection of a plan from a finite set of plans, and
that at each level the decision maker is faced with choice of plans. This
means that plans are revisable at any point where more than one feasible
sub-plan exists.

Parallel to the exercise of control with respect to plan selection
and sequence per se, is the flow of information that guides this control.
There is not only information that has been developed by inference and

interpretation of past events, but also the application of the same

32

mental processes to on-going events. As an example, driving a car
involves past knowledge of which roads lead to where, accumulated
driving skills, and the on-going assessment of traffic and traffic
signals. In the bargaining situation, the course of negotiations is
affected by knowledge of the factors bearing on the alternatives open
to both parties, knowledge of past bargaining sequences, and the
current evaluation of the on-going negotiations.

A convenient way to describe these simultaneous processes of
sequencing, plans selection, and information processing is to desig-
nate them as concurrently operating plans systems or programs.
These are labelled for subsequent discussion as the Main Activity
Program (MAP), the Plans Selection Program (PSP), and the Learn-
ing Program (LP), respectively. Behavior described in hierarchical

form can be represented by a list of instructions, for example:

1. Sell the 1962 crop (MAP)
a. Estimate the quantity and quality to be sold (LP)
b. Find out what buyer A is offering (LP)
c. Decide on one of the following (PSP)
i. Accept A's offer
ii. Make a counteroffer to A
iii. Abandon the exchange with A and approach buyer B

A prototype, on paper, of a bargaining situation would be a set
of instructions listing all possible contingencies and the rules for mak-
ing choices at each point where such choice is necessary during nego-

tiation. Each of the programs (PSP, MAP and LP) bears on the plans

33

hierarchy at all levels. Each of these programs are plans hierarchies
themselves. That is, there are plans for selecting plans, and plans
for acquiring and processing information as well as the MAP hier-
archy. It is seen in Chapter IV where the person executing a plan to
bargain is perhaps a 16, 000 member bargaining cooperative, that

these separate functions can be identified.

TIME

The author has asserted that the model of bargaining to be
developed is dynamic. The basic unit that is proposed is an extended
TOTE of the Miller form. A sequence of these units is called the
plan. It has been stated that identification of _a_._ plan requires speci-
fication of both the purpose and the time horizon. It has been stated
that the execution of plans occupies an interval of time. It has also
been asserted that the basis, in part, for plans selection is expecta-
tion. Obviously time is involved in the very fabric of the model.

The very important point to grasp is that there are two different
kinds or aspects of time involved. One of these is current time, that
is, the "edge of becoming. " The second aspect of time is the seg-
mented time which people use to plan, to coordinate motion, and to

record historical events (22).

 

(22) For an extensive and intriguing treatment of these two as-
pects of time in various cultures, see Edward T. Hall, The Silent
Language. New York: Doubleday, 1959.

 

34

Very simply, current time is the perception of the present from
point to point in chronological time. This is a dimensionless point on
a chronological time scale. For the individual, however, at each point
in current time, there is the perception of past and future time. In rela-
tion to behavior, planning is based on present estimates of future
events which, in turn, are based on inferences held at the present time
from events in past time. The plan therefore is the concept that ties
the past to the future via the state of expectations. Perhaps the closest
approach to the kind of behavior that exists in the absence of a seg-
mented time scale is observed in the culture of some southwestern
American Indians. In this culture, time is viewed as the "edge of
becoming" and the planning function at higher levels is simply dele-
gated to the appearance of seasonal or accidental events (23).

This concept of two different aspects of time is the basis for
the revisability of plans. At each point in time, the person is faced
with a choice of plans based on present estimates of future events. As
the individual moves from point to point through current time, these
estimates change upon receipt of information, that is, the person
learns, then revises and fills in his plans as a result of interpreting

on-going events in the light of his past experiences.

 

(23) Ibid.

35

This view of time was forced to the attention of the author when
the attempt was made to represent offers and counteroffers in the
market on a Cartesian coordinate system in the price-time plane. In
essence, the problem is one of representing on the plane, both the
"time track" of offers as they appear and converge in successful
negotiations, and, the present estimate of future possible time tracks
that the negotiator uses to select present counteroffers. The first is
an overt phenomena, the time scale can be either units of chrono-
logical time or numbers of offers. The second is a segmented time
that involves present estimates of the future costs or gains to non-
agreement as a function of time. This second kind of time is essen-
tially involved in the static model that is used as a basis for decision
in a dynamic real world. Once again the proposition emerges that
even though the "real world" is indeterminate and means and ends are
interrelated, the necessity for decision and planning forces the use
of determinate static systems as decision models. For this reason,
among others, the study of static models is relevant to interpretation
of human behavior. To illustrate, if a businessman assumes that
his price determining activity is "discovery" of some predetermined
point such as would be set by the "iron law of supply and demand,"
this behavior will reflect this assumption on his part. One would

expect somewhat different behavior from a businessman who assumed

36

that his price "discovery" activities in themselves were price setting.

It could be hypothesized that he would become more aggressive.

PLAN FEASIBILITY AND THE "VALUE" OF PLANS

It is the purpose of plans execution to eliminate incongruity.
Since plans can be based on expectations for elimination of incon~
gruity with probability of less than 1. that it will be achieved, it is

permissible to talk about incongruity reduction. Plan feasibility is

 

assumed to be based on an ordering of plans with regard to the es-
timated potential for incongruity reduction. This ordering is postu-
lated to arise from a subjective prediction about the degree of incon-
gruity reduction times the subjective probability of executing the plan
as intended or viewed at the time the plan is selected.

Using the concept of incongruity in this way extends it beyond
its original intended by Miller §_t__a_l. , but the extension is not as
distorting as it may seem at first. It is granted that subjective
probability is inaccessible data, and that the measurement of incon-
gruity poses the same problems that have plagued utility analysis. It
is proposed, however, that this problem be evaded. To be sure, if
one simply calls minimization of incongruity a transform of maximi—
zation of utility, one recognizes that the model of plan feasibility and

plans selection is of the Edwards NASEU form (24). The evasion is

 

(24) Ward Edwards, op. cit. (NASEU = non—additive subjective ex-
pected utility maximization).

37

perpetrated by two tactics. First, it is assumed that any plan that is
selected is the most feasible. That is, the plan which is selected

bears maximal potential for incongruity reduction as estimated by

 

the person at the time of plan selection. Thus, all behavior is as-

 

sumed to be rational. Rationality itself stands for a concept that im-
plies some measuring stick of rationality. In this discussion the
measuring stick, within certain limits, has been removed, hence,
within these limits the term rational is inappropriate. The term
"satisficing" used by Simon (25) is also not appropriate since any
decision that falls short of some maximizing criterion is identifiable
only in the presence of this criterion. Further, it may be assumed
that if a person does not consider all possible alternatives, or use
all available information and makes a decision that appears to be
only "good enough" rather than "best, " he is maximizing some set
of values that includes minimization of the costs of decision making
and information processing.

The second tactic for avoiding the problem of measuring
utility in the form of incongruity reduction is to consider the value
(of the product of incongruity reduction times probability of intended

plan execution) at its extremes. At one extreme would be the situation

 

(25) Herbert A. Simon, Models of Man: Social and Rational. New
York: John Wiley and Sons, 1957.

 

38

where the probability of execution as planned, would approach 1. but
the value of the incongruity reduction would be a net value of zero.
At the other extreme would be a large value for incongruity reduction
but the probability of execution as planned would approach zero.
Obviously, the value of the product in each case would approach zero.
Three points emerge, therefore, in the plans selection process
with regard to the feasibility of plans. These three points are plainly
identifiable in the formal description of the bargaining process, i. e.
1. The overt offer is assumed to be the most feasible plan
held by the offerer at the time the offer is made.
2. Since the plan to negotiate is executed to reach agreement
on some set of terms not presently existing in the market, the
incongruity motivating negotiation is related to the gap between
the most feasible offer held by the negotiator and the unsatis-
factory terms he is facing. Hence, the terms he is facing may
be accepted with a probability of 1. but offer is of zero potential
of incongruity reduction.
3. At the other end of the scale, there is a set of terms of some
positive potential incongruity reduction beyond which there is
zero expectation of successful agreement. This may be called
the maximum level of aspirations of the negotiator. The starting

bids at an auction may be assumed to approximate this point.

39

Only the third point above, which involves "aspirations, " leaves
the matter of measuring internal states of people. It will be demon-
strated in the model of bargaining that once the initial offers have
appeared in the market, only the first two of the above points need be
considered.

It will be assumed later that the sole variable to be negotiated
is price. It can be demonstrated that this does not destroy the simu-
lative properties of the model, but the question can be raised as to
whether or not this renders feasibility as simply the Marshallian
assumption of the constant utility of money. It is not. Quite apart
from any argument about the cardinal or ordinal utility of incongruity
reduction, the execution of the plan to negotiate requires the expres-
sion of underlying preferences on some cardinal and usually equal
interval scale. In this case, the scale is expressed in monetary units.
In this form, money appears as a code and also in its role as a
standard of value. It is interesting to note that in explaining his
NASEU decision model, Edwards indicates that if preferences are
expressed on a ratio scale (such as money), then the most appropriate
position for the true zero is the present financial position of the per-
son who is to express this preference (26). This agrees with the

postulate that the plan is based on the present estimate of future

 

(26) Edwards, op. cit. , p. 119.

40

contingencies or consequences of the contemplated action. It is not
suggested that this NASEU model is necessarily the rule used in plans
selection. The suggestion is only that this form of decision model
has certain properties which recommended its use in conjunction

with the notion of the plans for valuation of property.

It is not the intention of the author to generalize on what kinds
of decision models are used by what kinds of price offerers, be they
optimists, pessimists, rash gamblers, or the most conservative of
decision makers in the face of risk. The assertion is that whatever
the model, the decision preceding actual behavior was rational, or
"best, " or "most feasible" at the time the decision was made.

To return to consideration of the unit of behavior concerned
with negotiating the terms for exchange of property, assume for the
moment, for the sake of simplicity, that price is the only component
of the terms package that is variable. It can be postulated quite
reasonably that once an offer is present in the market, the following
set of alternatives is open to the opposing person:

1. Accept the other person's offer (the offer in the market).

2. Reject the existing offer and try to elicit agreement at

another price by making a counteroffer.

3. Reject the offer and abandon the plan to execute agreement

with the other person over this quantity of the property.

41

The formal description of this set is explored in Chapter 111,
but it will be noted that these three alternatives are of the same form
as the criteria for Exit from a TOTE unit. In the above order they
are, given an existing offer:

1. If no incongruity (the other person's offer is most feasible),

control passes to the next TOTE, e. g. physical transfer of

goods.

2. If incongruity still exists (the existing other person's price

is not acceptable), either repeat (select) the most feasible

counteroffer), or,

3. Abandon the plan (to bargain with this opponent).

The first point, acceptance of the other's offer, can be executed
with probability of 1. If there is no incongruity, the control will be
passed on from this TOTE unit to bargain to the next TOTE in the
plan to exchange. In other words, the plan to achieve price agreement
has been successfully executed without selection of a plan to negotiate.
Zero incongruity reduction is implied since none was present. This
does not imply that this price was considered "fair" or that a better
price couldn't have been negotiated. The postulate of the TOTE simply
asserts that the value held concerning the maximum feasible price that
should exist in the market (the expected market price on which the plan

to exchange is based), was the same as the price that existed when the

42

time came to seek agreement. This may be an entirely different price
on which the plan to produce the commodity was based. The difficulty
that arises in sorting out the notions of "what is, " "what should be, "
and "what can be, " arises from the necessity to sort out the values
and beliefs from the plans of varying time horizon and of varying
positions in the plans hierarchy. It was noted above, that the value
held concerning price in the plan to bargain was dictated by the choice
of the maximum feasible plan to exchange. This value may be very
different from the most feasible price that will emerge if incongruity
in the TOTE to bargain indicates the selection of a plan to bargain in
which there is the plan to negotiate. This latter price is formed in the
presence of different values, e. g. those which are included in the plan
to negotiate vis-a-vis the plan to seek an alternative market.

The second alternative, that of rejection of the existing offer and
formation of the counteroffer, yields the overt offer. This is assumed
to reflect the most feasible offer selected in the plan to negotiate. It
also indicates a revision of the value held in the TOTE to bargain.
Repetition of the plan to negotiate is contingent on the revision of the
existing offer which may mean revision of the belief (the data, or
knowledge of) which is the new offer by the other person.

The third alternative, that of rejecting the existing price and

rejecting the plan to negotiate with this particular other person, can

43

be executed with probability of 1. It will be chosen if it is the most
feasible alternative.

If the assumption that the quantity is predetermined is main-
tained, and more money is preferred to less money by the offerer,
and since acceptance of the other's offer and abandonment of the plan
to bargain with this particular other person can both be executed with
probability of 1. , then, it follows that the price represented by each
alternative is the measure of relative feasibility between the two
alternatives. To illustrate this in simpler and more concrete words,
if the buyer likes money, he will agree with the lower priced seller
if the alternative to bargaining with seller X is to bargain with seller
Y. The other alternative may be to simply abandon the plan to exchange.
In this case, the alternative to exchange will be assumed to have a
price equivalent lower than seller X. In other words, the “buyer put
his money back in his pocket and went home. The converse can be
described for a seller agreeing with the highest bidding buyer or
withdrawing his merchandise from the market.

It is postulated in the formal model of the bargaining process
and demonstrated in the case materials that the range of agreement
can be represented in the price-time plane on the price axis, between
those prices that represent for each person the minimal price beyond

which bargaining with an alternative person or abandonment of

44

exchange is more feasible. The overt offers, however, will fall

between the mutual estimates of these minimal valued prices (27).

 

When the alternatives to bargaining for each person are well known
to both persons, the agreement will fall between the price equi-
valents to alternatives to bargaining. The overt offers that appear
in this range are assumed to be points of maximum current feasi-
bility and reflect present estimates of the future net cost of non-
agreement. The convergence of offers toward agreement is then
hypothesized to result from mutual discounting, under uncertainty,
of the future net costs of non-agreement from the minimal prices
that are acceptable to the other person. It'follows that if no such
costs are perceived and the maximum acceptable price for the buyer
is greater than the minimum acceptable price for the seller, then
there will be negotiations but no convergence to agreement. In other
words, if there is a range of mutually acceptable prices and price
disagreement within that range, costs attached to non-agreement
(including foregone income), are required for agreement.

This description of bargaining is basically the same as those

cited by Cartter, who simply states that two parties will agree when

 

(27) The phrase "minimal offer" or "minimal valued price" refers
to a minimum price for the seller, a maximum price with respect to a
money scale to the buyer, e. g. that the buyer cannot be forced beyond
the minimal valued offer posed by the competitor to the seller, means,
that the maximum price that a buyer need pay to a given seller is set
by a price offer for the same commodity by another seller.

45

the costs of disagreement exceed the gains to disagreement (28).
The difference between this foregoing description and those
that appear in the literature on industrial relations lies in the fact
that abandonment of the plan to bargain is seldom a feasible alter-
native. This would mean the entire work force would quit and find
work elsewhere. Also, there is no attempt in this dissertation to
generalize about how different negotiators go about calculating the
costs of non-agreement, or what they tend to include as components

of cost.

PLAN FLEXIBILITY

In proposing the TOTE unit, Miller and his colleagues cite
considerable support from the presence of physiological correlates
to components of the loop form (29). They postulate that the TOTE
hierarchy extends down to the physiological processes that give rise
to the incongruity that is sensed as hunger, thirst, cold, heat or
other internal states that give rise to behavior related to what are
usually called basic needs. This leads to the elementary statement
that people do things because they are alive. This implies that aside

from suspense in some state of indecision, there is always at least

 

(28) Allan M. Cartter, The TheorLof Wages and Employment.
Homewood, Illinois: Richard D. Irwin, Inc. , 1959, Ch. 9.
(29) Miller, et a1., op.cit., pp. 21-25, and Ch. 14.

 

46

one feasible plan. The presence of one or more alternatives along
the plan sequence, however, coupled with the characteristic that plans
take time to execute, permits plans revision. The degree to which
the elements of a plan, the TOTE's, can be permuted or altered is
called flexibility. As examples, plans for shopping may be indifferent
in value with respect to the order in which the several business firms
are visited. On the other hand, farm production plans may be very
inflexible since some of the components are fixed sequences of bio-
logical activity that can extend over comparatively long periods of
time, e. g. planting to harvest, a gestation period. The more flexible
that a plans hierarchy is, the more alternatives are open at any given
point in the sequence. One measure of flexibility that could be pro-
posed is to count the number of alternative feasible plans at any given
point. It is not unreasonable to hypothesize that the intuitive feeling
for and the verbalizations concerning "freedom" are in some sense
tied up with the flexibility of the plans controlling the behavior of the

individual.

BELIEFS AND VALUES

By this time, the reader has recognized that the words belief

 

and value have been defined to a degree of generality that far exceeds

their ordinary usage. It would be better, perhaps, if a value were

47

defined as that which, when placed in juxtaposition with the status quo
and organized knowledge, produces incongruity. Nevertheless for the
sake of brief labels, and since the TOTE hierarchy is postulated to
extend in conceptually homogeneous form from intrapersonal physio-
logical processes to interpersonal shared plans, the two names will
be retained at all levels. Incongruity is then defined as the internal
state that motivates behavior and that arises from the discrepancy
between corresponding elements of the belief and value systems. It
follows from the preceding postulates that incongruity can be elim-
inated by:

1. A shift of values toward stable beliefs.

2. A shift of beliefs toward stable values.

3. A shift of beliefs and values toward some third position

of congruence.

As an example, the procedure for eliciting agreement on price
may be:

1. Agreement with the other party (the value that is a most

feasible price moves toward the belief, the other person's overt

offer).

2. Persuade the other person that agreement is possible only

on your terms (his offer, a belief to you, toward your value or

most feasible price).

48

3. Agree on some compromise that means a shift in both beliefs

and values for both persons.

In using the word values in this sense it is necessary to recog-
nize that the values associated with the shorter termed or lower order
plans may be pragmatic, and conflict with those held in association
with the higher order plans. This is an outgrowth of the hierarchical
form of behavior. As an example, the dissatisfaction over the price
one must accept for this year's apple crop does not arise from the
discrepancy between beliefs and values in the TOTE unit controlling
the exchange of this year's crop. Agreement was reached if the crop
was sold and the control passed on to the next TOTE, e. g. unloading.
The incongruity in this situation arises from the discrepancy between
this price and that incorporated in the plan to produce this year's, or,
next year's crop. Given the presence of others in the same state of
incongruity, this could lead to the individual's selection of a plan to
participate in a shared plan to bargain cooperatively for price of the
next crop of apples. The conflict that appears between "what should
be" and "what can be" does not define incongruity. This conflict arises
from the difference in what is feasible over different time horizons and
in different time periods.

The belief system is in essence the sum of organized knowledge

held by the individual. It includes the knowledge of values held by

49

others, perceptions of "what is" and present estimates for possible
future events, subject to the imperfections of uncertainty and mis-
information. In general, the belief system is the data that is the
basis for activity and the choice of plans when placed in contiguity
with the value system. To describe the bargaining process in these
terms, attention will be directed toward beliefs which include overt
offers, estimates of the limits to counteroffers which will not break
off negotiations, and present estimates of the future consequences of
non-agreement.

An integral part of the value system is the terms for trade
that are considered necessary in the longer time horizon plans for
future production, distribution, and consumption. This is where the
concept of homeostasis enters as a point of stability. In a very real
sense, past costs of production do not enter as a constraint on the
value of the terms of trade that are agreed upon. The cost constraint
that is imposed arises from the actions and reactions associated with
maintaining the existence of the firms or households involved, and,
the maintenance of the role of the negotiator in relation to the firm or
other person whom he is representing. The central point of orienta-
tion in connecting costs with the constraint on negotiated prices is
that part of the value system which is represented by the standard

used by the firm or household to assess goal achievement, e. g. the

50

profit entry in an accounting system, an Optimal distribution of an
annual crop such as no inter-year carry-over, or, adherence to a
household budget. The data in Chapter V will suggest kinds of stand-

ards used by negotiators in agricultural markets.

PLANS SELECTION

The Learning Program postulated above bears on the altera—
tion of both beliefs and values as a result of processing the data
sensed in the on-going environment. The Plans Selection Program
bears on the kind of contingency analysis of alternatives used by the
persons in bargaining and is value directed, i. e. given "what is, "
the plan that is selected is contingent on the specification of the plan
requested by the MAP. There are two important ideas that flow from
the postulate of a plan-controlled hierarchical PSP.

1. The explanation of habitual behavior.

2. The postulate of behavior intended to stabilize the environ-

ment within which decision making takes place.

Habitual behavior may be defined as behavior that is repeated
as a result of non-examination of the assumptions upon which the

original behavior was based(30).

 

(30) Fred T. Schreier, Human Motivation. Glencoe, Ill. : The
Free Press, 1957, pp. 84-85.

 

51

This non-examination of assumptions may be described, in the
context of the model above, as the selection from the memory of a
single most feasible plan without resort to some higher mental pro-
cess of judgment or approximation to fit a plan to a given situation.
This kind of view of habitual behavior is also found in the description
of "programmed behavior" outlined by Simon (31). To use the com-
puter analogy, this kind of behavior is completely "wired in. " It may
also be postulated that the routine performance of such behavior will
not be interrupted as long as the perceptions of the environment stay
within rather broadly specified values, e. g. buy one box of soap of
brand X as long as the price doesn't exceed 35¢. This is the basis
for the statement made above that behavior is value directed. That
is, it is controlled by the detail of the specifications of the values
held. There remains to be formulated the rule for the degree of

detail in plans specification (32).

 

(31) Herbert A. Simon, "The Role of Expectations in an Adaptive
or Behavioristic Model," Expectations, Uncertainty and Business Be-
havior (Mary Jean Bowman Ed. ). New York: Social Science Researa
Council, 1958, p. 49.

(32) In the opinion of the author, the intervening variable that Mil-
ler and his colleagues seek to replace, has simply been displaced. By
not pursuing a discussion of plans for selecting plans, they did not
rec0gnize that the "homunculus" that is the intervening variable is now
in the plan selector. What they have succeeded in doing is identifying
the unexplained element as that concerned with plan adaptation and
innovation. This is equivalent to saying that a computer program re-
quires a human programmer to design it, or at one step removed, a
human programmer to design programs to design programs, and so
on.

52

Nor does simulation require that a plan be fully detailed at the
time it is selected. A written list of instructions that represent a plan
could simply instruct the actor to defer plans selection until a specific
type of information is received.

One construct for ordering the "degree of detail" in specifying
which plans are to be selected is suggested in the "hierarchy of hypo-
theses" proposed by Meredith (33).

The explanation of survival in a surprising world is that
all surprises are not fatal. Meeting a surprise, the organism
finds its immediate hypothesis unfilled. ‘This occasions a state
of stress which calls forth a second hypothesis of a somewhat
more general character. The organism has an appropriate
behavior-pattern grounded in this second hypothesis. If this in
turn fails, the surprise is greater, the stress increases, and a
further line of reserves is called up, grounded in a still more
general hypothesis; and so on. This is not an infinite regress.
Sooner or later one or two alternative events must occur: either
a valid hypothesis is found and the appropriate reserves are
thrown into the battle, or the forces of the organism are strained
to the breaking point and it collapses. The "hypothesis of no
surprise" may thus be restated: "In the hierarchy of hypotheses
a point of validity will be found. " This is the condition for sur-
vival.

The conflict of interest in bargaining seldom warrants the use of
battle reserves, or induces the collapse of the persons, but if the word
plan is substituted for "hypothesis" and "a more general hypothe sis" is

a more comprehensively detailed plan, then the suggestion is, that

 

(3.3) G. Patrick Meredith, "The Surprise Function and the Epis-
temic Theory of Expectations, " Expectations, Uncertainty, and Business
Behavior, op. cit., p. 75.

 

53

plans can be ranked according to some scale of importance related to
the severity of the costs involved as a consequence of non-action. It
is not unrealistic to expect a person to routinize decision making that
normally receives attention when a different area of planning requires
the forging of extensive plans or the consequences of error are costly.
These notions are parallel to the implication of a cost to decision
making (plans selection) associated with the idea of "satisficing
behavior" advanced by Simon (34). The author also has attempted to
empirically identify the effects of varying levels of decision activity (35).

Further pursuit of the structure of this portion of human behavior
is more properly in the realm of psychological investigation but one
important postulate that emerges is of importance to the bargaining
situation. It is postulated from the structure of the PSP that routini-
zation of behavior is incongruity reducing.

As a corollary to the proposition that routinization of decision
making (plans selection) is incongruity reducing, it can be suggested
that human institutions are stable social arrangements that are the
result of shared plans to simplify the decision making process. The

reaction to disruption, often in the form of social sanction, that

 

(34) Herbert A. Simon, Models of Man, op. cit.

 

(35) David H. Spaeth, "Relationships Between Role and Self Per-
ceptions, Family Characteristics, Shopping Attitudes, and Food Pur-‘

chase Behavior," unpublished M. S. thesis, Michigan State University,
1960, pp. 5-8.

54

maintains this condition of homeostasis is recognized as a factor de-
limiting the range of activity of the individual group member. The
important point of emphasis raised by the postulates of this disserta-
tion is that the institution is purposefully maintained. This makes it
important to examine the basis for the purpose before accepting the
limits imposed by the institution as given. Not only must one pay
attention to the problem that forms the basis for the existence of
institutions, but one must also recognize the extent of the constraints
that can be exerted on various individuals. As an example, a con-
certed effort by businessmen in a small town to not "rock the boat"
on the local wage levels, can be nullified by a social "out group. "
The recent decline of fair trade pricing has been implemented by the
nullifying activity of non-price competition and the operation of dis-
count houses that are largely beyond the disciplinary efforts of manu-
facturers who attempt to police their distribution systems. Institutions
are controlled by shared plans that can change, that is, can be flexi-

ble and revi sable .

SHARED PLANS
Mention has been made in a number of places in the prece

text of shared plans. Bargaining by a cooperative association composed

 

of agricultural producers is postulated to be an activity executed under

55

the control of a shared plan. Since shared plans involve more than

one individual, the control and information processes within this
shared plan involve internal inter-personal communications. Where

the plan that controls the individual is being considered, this "internal"
communication is largely inaccessible. Quite often, however, the
internal communications in a group operating under the control of

a shared plan is accessible in a number of forms. The internal com-
munications of a few bargaining cooperatives, as recorded or written
down in their published magazines, brochures, and mimeo-form
messages, are cited in Chapter IV.

The point raised here is that if the concept of the plan is appro-
priate to shared plans, the correlates of the PSP, MAP and LP should
be identifiable in the group activity and internal communications. It is
suggested that the PSP is represented by the policy decision making of
administrative officers, the MAP by the coordinating activities of
management, and the LP by the internal information flows plus the
external public relations and information-gathering activities. In other
words, the concept of the plan yields a way of talking about organiza-
tions. The internal decision making processes that are postulated for
the individual yield a conceptual framework for discussing the aggre-
gation of preferences within an organization into a single unambiguous
statement or action, e. g. the single price offer necessary for the

exchange of property.

56

The political process by which conflicting interests and pref-
erences between group members are resolved into single action are
in fact a welfare function. This valuation of property is achieved by
a combination of individual and shared action from two directions.
First, the offer represents the selection of a single course of action
or plan from a finite set, and represents the aggregation and reso—
lution of preferences by the person, or group. Second, the system
of rules under which internal conflicts within groups are resolved is
the result of the shared plan that is the legal framework for re solu-
tion of such conflict. This legal framework is defined within the
very large shared plan that controls the behavior of a nation, in which
the plans selection is implemented by legislative action and/or

executive edict and judical interpretation.

CHAPTER III

THE PLAN TO NEGOTIATE

It is best at this point to define negotiations with respect to the
words bargaining and exchange. This may be done by starting with
the behavioral unit or TOTE that is the complex of actions called
exchange. This behavioral unit or TOTE, "exchange property, "
employs stop rule criteria in its Test phase. These criteria require,
in a simple statement, that if exchange has been successfully exe-
cuted, the buyer will hold the commodity instead of money. Also, 1
the seller will hold money instead of the commodity that he sold. If
control has passed to this TOTE, "exchange property, " and the seller
has his goods or the buyer his money, the test is not met, incongruity
exists, and the control passes to the Operate phase. This Operate
phase consists of a series of TOTE's called the plan to exchange. They
include all of the activities that must be performed to exchange property.
The sequence could include packaging, grading, transport, and the
numerous activities associated with marketing services. Among
these TOTE's in the plan to exchange is the TOTE "bargain" in which
the Test phase compares a price held as a value (that price which is
included in the plan to exchange as the expected price on which this

plan to exchange was selected) with a price that can actually be

57

58

accepted. The stop rule includes the condition that these prices must
agree.

This comparison occurs in the Test phase of the TOTE, "bar-
gain. " If the market price agrees with expectations, there is no
incongruity and the control passes to the next behavioral unit, e. g. ,
"unload truck, " or "pick up merchandise. " If the price does not agree
with the value held in the Test phase, control passes to the Operate
phase of the TOTE "bargain. " Following the general form of stop
rules, there are then three alternatives.

First, if operation of PSP reports no feasible plan to bargain
(achieve price agreement), the plan to bargain is abandoned. Since
price agreement is a necessary condition for exchange, the plan to
exchange is also abandoned. (Agreement includes the case of agreeing
to defer agreement, e. g. , the "no price" delivery, or later agreement
according to a price yet to be determined by some rule that is agreed
upon.)

If, however, the PSP indicates a feasible plan to bargain, it
will be of two forms: either the search among alternative other persons
for an agreeable price offer, or, the approach to a particular person
for the purpose of eliciting at least one counteroffer. This latter form
is the plan to negotiate. It is conceptualized as in the Operate phase

of the TOTE "negotiate. " The Test for stop rule criteria includes the

59

comparison of the value, "should receive counteroffer, " with sensed
data indicating whether or not such a counteroffer was forthcoming.
One of the TOTE's in the plan to negotiate is "make offer, " which is
one primary subject of discussion in this chapter. The transmission
by some means of an encoded offer meets the condition for Exit from
the TOTE "make offer. " A counteroffer is sufficient for Exit from the
TOTE "negotiate. " The information conveyed by the counteroffer is
processed by the LP and fed to the Test phase of the TOTE "bargain. "
The Test is applied and if the price quoted in the counteroffer agrees

with the price held as a value in the Test phase of the TOTE "bargain, "

at the time this test is made, the control passes to the next TOTE in

 

the plan to exchange.

It is seen, then, that the plan to negotiate is directed at the
immediate purpose of eliciting a counteroffer and is executed in a
sequence designed to achieve agreement between prices. Negotiation
is not the sole means for finding price agreement. One can shop around
until the variation in price tags and revision in the price held as the
Test value lead to agreement. It follows that a plan to negotiate in-
volves the communicative contact between two particular people, and
is indicated by at least one counteroffer.

It also follows from this definition of negotiations that the author-

ity to exchange the property must converge on the negotiators. To

60

assert the contrary would mean that their verbalizations are meaning—
less as the actual means to reach agreement on price with the other
person. The intended meaning behind the statement that a person is
bargaining in "good faith" may be hypothesized to be the assertion that
the plan to negotiate was in fact executed for the purpose of eliciting

a counteroffer that is intended to reach price agreement. It could be
suggested that negotiations be carried on for other purposes, such as
deliberate delay or the impact on some third person. It is assumed
in this discussion that the negotiations are in good faith, as described
above.

With respect to authority, bargaining has been described as an
activity involving two actual participants. In other words, it is a
necessary condition for the completion of the exchange for 39119. pair
of persons to agree on a set of unambiguous terms for the exchange.
This is true even if the actual agreement is deferred until after the
physical commodity or the legal claim thereto has been transferred.
Even the dispensing of a candy bar for coins by a vending machine
requires some singular decision authorizing the design of the machine
to dispense one bar for a particular set of coins.

This formation of the offer in negotiations and the matter of the
location of authority are relatively uncomplicated when the person is

a single individual. The reconciliation of conflicting interests in the

61

group that is executing the shared plan to bargain, and the delegation

of the authority to a spokesman are a bit more complex. It is asserted,
however, that the basic structure of bargaining and negotiations is the
same whether the person is an individual or a cooperative bargaining
association. The substantiation of this statement is advanced in

Chapter IV.

FURTHER ASSUMPTIONS

Perhaps the most sweeping assumption to be added at this point
is that the sole variable that will be allowed to change in the model of
negotiations is money price. This assumption is not as restrictive as
it may first appear and does not impair the simulative property of the
model. Flexibility of description under this assumption is achieved
by simply asserting that the price is the last aspect of the terms pack-
age that is agreed upon. In a given series of offers. and counteroffers,
it is assumed that if any aspects of an issue are raised other than price,
the settlement of these is followed by agreement on price, even if it be
no more than a re-affirmation of a previous price agreement. To
illustrate, suppose that during price negotiations on the price of a
strawberry crop the issue is raised about who furnishes field crates.
In formally interpreting this series of price offers and counteroffers,

it is assumed that the price issue is open until the field crate issue is

62

settled, even if the price at which strawberries are finally sold was
agreed upon before the issue about field crates was raised.

By making this prior assumption that all aspects of the exchange
except price are settled first, a second assumption follows that all
non-price aspects of the terms for trade can be reduced to price
equivalents. That is, to use the above illustration, if there is a
price which can be offered on the basis of the processor furnishing
the crates, then there is another price for each person that is equi-
valent to this price where the growers furnish their own crates.

Thirdly, it is assumed that if sufficient structure exists in
the preference system of the individual or group that is the person to
make the overt offer, then maximal or minimal prices exist and are
potentially encodable as overt offers. This means that if the person
can make an overt offer, then an offer is assumed to exist that is the
worst that he will accept, or, the best that he could hope for, and
still not abandon the plan to bargain.

It is postulated that the plan to negotiate (which includes the
making of an overt offer) is based on present estimates of future con-
ditions. It is corollary to this postulate that price negotiations are
based on a quantity that is assumed to be fixed by the offerer. It
follows then that the object of bargaining is also the determination

of total revenue to be exchanged. It is an assumption of the model

63

that the quantity of the property is fixed, but this assumption is intro-
duced by way of the postulate that the offerer assumes that it is fixed.
This is a minor point in the formal model, but in real world negotia-
tions it is seen that crop estimates can be of central importance and

a disruptive factor where weather seriously affects yields. In the
usual situation where an agricultural producer group is the price
aggressor, the processor cannot be compelled to take a fixed quantity.
Hence, the price that is to be agreed upon in advance of a harvest
period must be based on preharvest estimates of the quantity to be
moved, if a desirable distribution pattern is to be achieved. This

matter will be more fully considered with the interpretation of the

word supply.

OFFERS

One of the TOTE's that is postulated in the plan to negotiate is
the TOTE, "make offer. " It has been postulated that the overt offer
is the one that is most feasible. It has been assumed that the maximal
and minimal offers exist if the overt offer is made. To talk about
these offers, it is convenient to fasten symbols on them as follows:
(the subscript indicates the number of the offer made in the execution

of this particular plan to negotiate, i = 0 means prior to overt offers

64

The minimum price considered feasible as an offer by
the buyer. It is a maximal valued offer to the buyer,
with expected subjective probability of acceptance ap-
proaching zero.

The overt offer to buy, or, the most feasible offer to
buy if i = 0.

The maximum price the buyer will pay rather than aban-
don the plan to negotiate. Probability of execution is 1
and the value for incongruity reduction approaches zero.
This is called the minimal valued offer to the buyer.

The minimum‘price that the seller will accept rather
than abandon the plan to negotiate. Probability of execu-
tion is 1. The potential for incongruity reduction in the
TOTE "bargain" approaches zero. This is the minimal
valued price to the seller.

The overt offer to sell, or, the most feasible offer if

i = O

The maximum price considered feasible as an offer by
the seller. It is the maximal valued price to the seller
with potential for incongruity reduction high. The subjec-
tive expected probability of execution by seller approaches

zero.

65

A primed symbol indicates that the price is an estimate by the
other person, e. g. , Ci' is the seller's estimate of the minimal valued
possible price to the buyer.

S, and Bi are the only overt data common to both persons (i >0).
and Ei are values held in the Test phase of the

PSP, TOTE that is picking which offers to make. The primed coun-
terparts to these symbols are beliefs formed from market data furnished
from the operation of the LP. Bi and Si are held as values in the Test
phase of the TOTE "bargain" to await comparison with offers by the
other person. It is the function of the PSP then to select offers and it

is true that:

A. <_B. <..C. and D. SS. SE.
1 1 1 1 1 1

There are two periods that may be recognized with respect to a
series of offers and counteroffers through "current" time. The first
is that time period prior to the first overt offer; the second is the period
after the appearance of the first offer in the market. In the pre-overt
offer period the selection of the first offer, by one person or the other,
is based entirely on estimates. There is no offer in the market by the
other person that can serve as a point of reference. It is of prime con-
cern to the first offerer not to make an offer that is less than that
which would be most feasible, if the most feasible but as yet unverbal-

ized offer of the other person was overt data in the market.

66

Once an offer appears in the market, however, the other person
has three alternatives facing him, as suggested in the last chapter.

1. Accept the other person's offer.

2. Reject and make a counteroffer.

3. Reject and abandon this plan to negotiate.

These are of the form of the stop rule for the TOTE "bargain"
and may now be expressed symbolically.

Exit from TOTE "bargain" if: Bi = Si or Ci < Di' or Ci< Di

These last inequalities symbolize the situation where the buyer's
minimal offer (highest price he will pay) iS 1888 than the buyer's pres-
ent estimate of the seller's minimal valued price (the least he will
accept), orthe seller's estimate of the buyer's minimal valued price
is less than the seller's minimal valued price. Note that the primed
terms include present estimates of future possible states. To put this
stop rule into even simpler language, the plan to negotiate in good faith
will be terminated when price agreement is reached or either person
assumes that he cannot make an offer that will fall into the range of
acceptance of the other person.

The above symbolic statements may now be combined as follows:

A,SB,SC,andD,SS,$E,
1 1 1 1 1 1

and continued negotiations require that:

67

and price agreement via negotiations requires:

B, =S,.
1 1

From these statements, the following two can be made:

D.<B.SS.SC.andD.'SB.SS. SC.‘
1 1 1 1 1 1 1 1

This is saying that the range for price agreement by negotiation
falls between the prices that represent the limits within which the plan
to negotiate will not be abandoned for lack of a feasible offer, and
within the mutual estimates of these limits.

This is not an ambiguous statement. It implies that the limits
to the range of price agreement by negotiation can assume four con-

figuration s:

D.‘ S C.', D.‘ S C., D. S C.', and D. S C
1 1 1 1 1 1 1

1

The limit that is operational is the inner pair in the sentence:
D. § D,‘ S B, S S, S C,‘ § C,, where D, S S,, and B, S C. recog-
1 1 1 1 1 1 1 1 1 1
nizing that:
D. § D.‘ s A. and E. s C.‘ § 6..
1 1 1 1 1 1

The limiting relation Di' S Ci' represents the range of agreement

in the situation where each person is underestimating the minimal

68

acceptable offer of the other. That is, the seller is basing his offers
on the error Ci' < Ci’ and the buyer is making the error Di < Di'.
Where Di' = Ci" each party is approaching the market with estimates
such that the best offer that each assumes that he can make is the best
offer that the other person assumes that he can make; since:

If Di' S Ai and E1 S Ci" and Di' = Ci" then A1 = Ei’ but if
Di' S Ci and Di S Ci', then Di' = Di = Bi = Si = Ci = Ci' and this coin-
cides with the last configuration of limits above (Di S Ci)° This also
precludes negotiation because any offer that is made by one person is
immediately acceptable to the other, meeting the stop rule criteria
for the TOTE "bargain, " and the plan to negotiate is not executed.

Suppose that the error is made by both parties in the opposite
direction, that is, Ci' > Ci and Di > Di'. The seller assumes that the
buyer will pay more than he in fact will, and the buyer assumes that
the seller will sell at a lower price than he in fact will. The offers
will fail in the range Di' < Ci" but the acceptances will fail in the range
Di < Ci and the range of agreement is the latter. What will tend to
happen is that repeated offers and counteroffers will lead to the con-
vergence of Ci with Ci' and Di with Di' at points depending on whether
the shift is in the values Ci and D1 or the beliefs Ci' and Di' or both,

under the impact of the LP. This is the assertion that persons learn

from the on-going negotiations. Learning implies either deliberate or

69

unintended teaching. If the teaching is in fact deliberate, then one has
the strategies of persuasion that mark real world negotiations.

In the other two symbolic representations of the configuration
of limits where only one person is making an error, and the offers are
made under conditions where Di < Di' _S C1 or Di S Ci' < Ci’ any offer
by an offer-maker is within the range of agreement. However, the
error-maker is denied the possibility of agreement in the more valua-
ble part of the range (Ci - Di) if he persists in the error. If it is
assumed that the activity of negotiations is costless, then the greater
potential loss of revenues lies in Di < Di' and Ci' < Ci' This is true,
since, if these inequalities are reversed in the situation where one or
both of the persons are making errors, it is the actual range of accep—
tance based on the most feasible plans alternative to negotiation (Ci
and Di) that is controlling. No portion of the range of actual potential
agreement will be excluded as a range of possible offers. This means
that the "safe" way to approach negotiations under uncertainty is to
make estimates such that Di > Di' and Ci' > Ci are virtually assured.
This means, assume the other person is not making the best offer that
he can. This is a reasonable simulation of the cautious bargainer. The
extremely wide differences of initial and final bids are also characteristic
of unorganized markets where successive trading on the same merchan-

dise is not present to yield close initial estimates of value. It also

70

follows that increased information about the nature of the other person's
limits of feasibility, held by both persons, tends to reduce the dif-
ference between the initial offers. This is true, first, because the
conservative strategy of making wide allowances on initial bids is not
necessary. Second, the range of prices which forms the limits of
actual acceptance narrows as the expected probability of agreement
(one of the two factors in feasibility) centers on fewer price offers.

The hypothesis that the range of initial bids is reduced by increased
mutual information has been empirically demonstrated under controlled
conditions by Siegel and Fouraker (36). These experiments will be
cited in more detail later in the text.

As a summary statement, it can be said that the limits to the
range of prices that can be agreed upon by both persons in negotiation
is set by the prices beyond which either person will consider it more
feasible to seek agreement with another person, in another way, or
abandon this plan to exchange. The range can be further limited if
either party makes an error in estimating the limits of feasibility in
the other person's plans to negotiate.

The question can be raised as to why it is implied above that

Di' < Ai and Ei < Ci', or, why the range of estimates of the limits to

 

(36) Sidney Siegel and Lawrence E. Fouraker, Bargaining and
Group Decision—Making. New York: McGraw-Hill Book Co. , 1960.

 

 

71

feasible offers sets outer limits to the prices that are considered the
best with regard to incongruity reduction in the over-all plan to pro-
duce, but of zero probability of execution. To put this another way,

is it not likely that an offer will be made, at least in the early stages
of negotiation, that the offerer considers to be unrealistically to his
advantage? This point can be side stepped formally but leads to un-
observables when the real world is examined. It can be assumed

that any offer that falls outside of the range of mutual estimates of

the other person's alternatives to negotiation is not an offer made at
the level of the plan to bargain. It can be conceptually identified as

a sub-plan that is the operation phase of a TOTE in the plan to
negotiate that is not immediately directed at reaching price agreement
but at manipulating the environment for subsequent offers. It can be

a "softening up" tactic. It can be a high offer that allows the offerer
to yield without conveying weakness or it may be intended to avoid
triggering charges that he is "not bargaining in good faith. " This is

a common charge where one side or the other refuses to yield at all.
Chapter V will be more concerned with hunting real world counterparts
for the substantives in the mode, but an example is cited here of the
problem of differentiating between offers to seek immediate agreement
and those designed primarily to "teach" or shift the values of the other

person. In the milk industry in the Detroit area, there is nearly always

72

an argument over the impact of Chicago and Toledo milk prices on the
Detroit price. The Chicago milkshed in particular is the chief alter-
native source of milk that is available to Detroit dealers. There are
laws on the books that would impose a considerable burden on the
inspection system, but presumably there is a Michigan price at

which dealers would turn to Chicago for their milk rather than use
Michigan milk. This is a referent for the price Ci in the model.
Suppose that Michigan Milk Producers Association is the seller, then
their estimate of the price at which alternative supplies of milk are
available to the Detroit dealers is Ci'. By definition under the model,
any price offer by MMPA above Ci' is presumably not aimed at immed-
iate agreement, but possibly made to allow room to yield. This may
be true but need not be true. Ci is a dealer held value based on his
estimates of the consequences of nonagreement. This estimate in-
cludes the knowledge of plans to wage economic warfare above a cer—
tain price demand by MMPA. Ci' is an estimate made by MMPA of
the dealer's bargaining position. Neither Ci nor Ci' are observables.
There can be an honest difference of opinion between the two persons
for at least three reasons. First, the bases for computation of the
price at which alternative milk may be purchased by the dealer may
differ. Neither side is going to publish its precise plans for economic

conflict, which may include some pressures that can be exerted on

73

sellers of milk in Chicago or other areas of potential supply. The
second difference of opinion about the price of alternative supplies
would arise from differences in the estimates of the impact of the
length of any potential conflict on the prices at the alternative source.
The purchase of a few days' milk from alternative sources would have
different impact than attempting to supply Detroit from an alternative
area for six months (37). Also, estimates of the length of time of
economic conflict may differ.

The point to be made with regard to the formal model is that
since offers made at the level in the TOTE hierarchy which are in-
tended to elicit acceptance with some probability, are indistinguishable
from those that are designed primarily to manipulate the context of
negotiations, it is assumed that all offers are made in good faith.

That is, all offers are within the range of prices bounded by the
estimates of the other person's minimal valued prices. Since actual
agreement can be achieved only within the limits of the actual minimal

offers, it is these prices (Ci and Di) that bound the range of agreement.

TIME, CONSEQUENCES, AND GAMES
The previous description of the bounds to the range of mutually

acceptable prices has tended to intermingle the concepts of "current"

 

(37) Michigan Milk Messenger, Michigan Milk Producers Asso-
ciation, January 1960.

 

74

time, and segmented time that is used in forming plans. This inter—
mingling occurs because both are involved in the Test phase of TOTE
units at all levels. It has been stated as a basic premise that people
are compelled by the force of incongruity to select specific courses of
action in the face of uncertainty. It is on the basis of this premise
that the two aspects of time can be kept separate. It is true by pos-
tulate that the value held in the Test phase is in large part stipulated
by the expectations of higher level plans or TOTE's. As an example,
the value held in the plan to bargain at any particular time is dictated
by the currently executed plan to exchange. It is equally true that

the belief system is based on expectations which involve future time,
as interpreted on the framework of inference from sequence of past
events. "Current" time is not involved here, but is identified in the
Test phase of the TOTE units in the MAP. Current time is the kind
of time that is involved in that part of the behavioral program or plans
hierarchy that controls sequence per se. Decisions are based on point
by point estimates that form the value and belief systems.

It has been postulated that both beliefs and values are based on
expectations that form plans and are derived from plans. Value of
plans has been defined as the product of the subjective estimate of the
probability of a plan being executed as specified at the time of selection

times some net utility or expected incongruity reduction. Only three

75

values are considered in this discussion. These are the zero values
at which either the probability of execution or the net expected incon-
gruity reduction approaches zero, and the maximum value that is
assumed to be assigned to manifest behavior. Nevertheless, there

is an underlying discrete function that assigns values to plans although
these values are not observable, nor is a cardinal scale of value or
feasibility assumed.

Gathering together the notion of plans value, plans selection
from finite sets of plans, two-person negotiation, and a bounded range
for price agreement times an assumed fixed quantity, it is possible to
interpret the process of negotiation as a zero-sum two person game.
The value of the game is the total revenue involved in the difference
between the alternatives to negotiation or, (Ci - Di) times the quantity
of property. A table of pay-off values is held by each player. The
entries are the plan values and estimates included in the contingency
analysis of each player. In the very simplest form, the events that
ensue in negotiation can be described as a mutual filling in of a joint
pay-off function, each party specifying a transform of total revenue
until they agree on a common value. Conceptually, the pay-off function
would be represented by columns and rows, the number of each being
the number of alternative plans known to each player. Each entry in

a row or column would be a value of total revenue that one would expect

76

as possible agreement if a given plan of action was chosen. The only
valid point would be the maximum pay-off to the seller or the mini-
mum pay-off to the buyer representing overt offers since neither
party would reasonably offer more than necessary. Using this frame-
work for interpretation, the bargaining can be described as a sequence
of plays in which the players approached a saddle point by making
successively less valuable moves. The point of agreement could
then be accurately called the saddle point in a two person zero—sum
game, but the saddle point was determined by mutual exploration of
the pay-off function. The columns and rows represent plans to nego-
tiate; the matrix represents the plan to bargain. The perfect knowledge
situation, where the pay-off matrix was fully known by both parties,
would represent the situation where Ci' = Bi = Si = Di' and the persons
would proceed directly to the saddle point.

The plan to bargain under uncertainty and imperfect knowledge
would be represented by a list of instructions as to how to make each

play at each point in current time. The plans or plays selected would

embody forward segmented time.

THE PRESSURES TOWARD AGREEMENT
In light of the preceding discussion, there arises the question of

why agreement is reached if the prices representing the limits to the

77

range of possible agreement do not coincide. First, the assertion is
made. on the assumption that more is preferred to less, that each
person will try to reach agreement at a price most favorable to him—
self. This means that there will be pressure for B1 to remain in the
neighborhood of Di' and for S1 to remain in the neighborhood of Ci'. It
has been assumed that Ai >_ Di' and E,1 S Ci'; therefore. it may be
expected that convergence to agreement will proceed to En = Sn from
B = A = D ' and S = E = C ' in n offers. Once bona fide offers

0 0 0' o o 0’

appear in the market, the mutual set of offers Bl < Sl replaces the
bounds Ci and Di as the limit to the range of feasible counteroffers.
It is now postulated that the maximum feasible counteroffer will appear
as Bi < Bi+

S S, or B, S S,+ < S. if there is a net cost to delaying
1 1 1 1

1 1

agreement. It follows that if no future cost to delay of agreement is
estimated at successive points through "current" time at which the
counteroffers are picked (plans to offer), and if Bi < 51' then there will
be no agreement. To state this another way, the pressure to reach
agreement on a single price in the range of possible agreement arises
from present estimates of future expected costs of nonagreement or
delay for an estimated period of time. In regard to the formal model,
then, successive offers in negotiation will represent points of maximum
feasible prices that involve discounting from mutual estimates of the

other person's minimal valued prices. Since the point of choice is

78

always current time, the convergence of offers reflects a re-evaluation
of future consequences as each offer appears in the market. This is
the assertion that each person learns from the on-going negotiation.
Since the on-going information is interpreted on the basis of past ex-
periences, the course of negotiations is determined by successive

present estimates of future consequences based on past experience

(supra, p. 34).

FORMAL RULES FOR REACHING AGREEMENT

Any generalization about the changes in price offers through time
is in effect a rule for indicating the procedure for predicting agree-
ment. This particular point has been considered in a study that attempted
to examine the nature of bargaining in a controlled environment. Siegel
and Fouraker set up experimental bargaining sessions using graduate
students as subjects. The value of offers was indicated by profit tables
that were derived from linear average revenue curves and assumed
cost schedules. The experiments were designed to explore hypotheses
about joint selection of quantity, maximization of joint gains under
conflict of interest in bilateral monopoly situations, and the division of
this gain between the opposing parties (38). They comment on the

approach to agreement between the opposing parties as follows:

 

(38) S. Siegel and L. E. Fouraker, op. cit. , p. 90.

79

The typical pattern of bargaining that emerged was as
follows:

1. The subject would open negotiations at a high level,
usually his highest level of expectancy.

2. The failure experiences represented by his rival's
early bids (which, being at the rival's high level of expectancy,
typically involved a negative pay-off to the subject) made it
apparent that concessions would have to be made before agree-
ment could be reached.

As negotiations progressed, in the absence of infor-
mation (of the other's profit table), the succession of bids
served to (1) give experience to the subject enabling him to
establish the realistic level of aspiration, and, (2) enable the
subject to find means by which concessions could be made to
the opponent without making offers below the aspiration level.
Aspiration levels were modified as negotiations proceeded,
although it appears reasonable to suppose that the subjects
began bargaining with an a priori minimum level of
expectancy (39).

Under the experimental conditions, the costs that fostered the

pressure toward agreement were a time limit imposed by the experi-

menters, which presumably implied that the payment for participation

in the experiment would be forfeited if the instructions were not fol-

lowed. The subjects had the alternative at the beginning of the experi-

ment of choosing a flat rate wage in alternative employment, the offer

of which was used to attract the volunteers. The bargainers were

paid the amounts of money equivalent to the terms at which they agreed

in the bargaining sessions.

The outlines of the model of bargaining are evident in the Siegel

 

(39) Siegel and Fouraker, op. cit. , p. 90.

80

and Fouraker analysis. The reference to the "failure experiences"
and implied learning about "realistic levels" of aspirations indicate
that the experimenters were interpreting their data largely on a
stimulus-response framework. It is possible, however, to trans-
late this into an interpretation that is based on the cybernetic hypo-
thesis, that is, a TOTE-based theory.

The statement that the bids opened at the "highest level of

=B =D', and

expectancy," can be represented symbolically by A1 1 1

S1 = E1 = Cl'. The statement that the succession of bids gave exper-
ience to the subject enabling him to establish the realistic level of
aspiration (in the absence of mutual knowledge of profit tables) is the
assertion made above that as negotiations progress there is a tendency
for Ci' to approach Ci’ and Di' to approach Di’ and for the prices Ai
and E1 to be constrained by these estimates. Symbolically

Di S Di' = Ai < Ei = Ci' S Ci. Here the "inner" range of prices for
agreement is constrained by the estimates. The alternatives to nego-
tiation at prices C1 and Di could be presumed to exist at the level of
zero profits under the conditions of the experiment, since, although
negative profits were indicated, they would not in fact have been
enforceable. Under these conditions, adamacy at some positive profit

level would be expected that would be predicated on the prediction that

the same attitude would be held by the opponent. This adamacy has

81

the effect of establishing Ci and Di at positive profit levels, and as
points which are sought by the mutual probing of limits to agreement
by counteroffer.

In the Siegel and Fouraker statement there is also reference to
"means by which concessions could be made to the opponent without
making offers below the aspirational levels. " This statement would
imply that at the point of agreement, each person would assume that
he had attained the best possible price. This is at variance with the
verbalization that, "I could have driven a hard bargain, but I decided
not to. " Simulation requires that this latter phenomenon be accounted
for.

The implication in this statement is that the range from which
the price offer is selected, is smaller than the range within which the
offerer feels that he could actually achieve agreement. This is pos-
tulated to be a reflection of estimated costs of non-agreement and
that it can be symbolized as Di' < Ai S Ci and Di S Ei < Ci'. It is
asserted then that the gap represented by (Ai - Di') and (Ci' - Ei)
reflects the present discounting from estimates of the opponent's
point at which he will resort to alternatives to negotiation. The es-
timates Ci' and Di' are data reported about Ci and Di by the LP. A1
and Ei are values held in the PSP-TOTE "select offer," that are

formed from present estimates of the future costs of non-agreement.

82

Within this range (Ei - A1) the further discounting that leads to offers
such that Ai < Bi and Si < Ei’ represents offers at levels less than
those indicated by maximum aspirations. It is then appropriate to
postulate that the discounting (Ai - Di') and (Ci' - Ei) arises from pres-
ent estimates of those costs that the opponent is able to impose. It is
further postulated that the discounting (Bi - Ai) and(Ei - Si) is due to
the personal preference of the individual negotiator to not press for
prices at present levels of maximum aspiration.

To summarize these statements it can be stated that the con-
vergence, through time, of the overt offers toward agreement is a
function of:

l. The alternatives to negotiation open to each person.

2. The mutual estimates of these alternatives for the other person.

3. The perception of the costs that can be imposed by the other

person as a consequence of non-agreement.

4. The disutility to the negotiator of the acts or tactics necessary

to achieve agreement at his maximum level of aspirations.

5. In turn, each of these factors yields a set of plans from which

one and only one must be selected. These plans involve pres-
ent estimates for future states, hence the fifth factor is time

in its static segmented sense.

83

This list of variables is neither new nor uniquely associated
with one researcher. They have been cited in one form or another by
Fellner. with respec t to the oligopoly problem, and Cartter and Pen,
in the industrial relations area(40). This is not surprising because
the model proposes to simulate the overt behavior that is the basis
for the theories of those authors and others. Citing the two aspects
of time and the revisability of estimates of costs is not original with
the model} this is cited by Cartter as a factor leading to agreement in
wage negotiations (41). The worth of the model then must be identified
with statements beyond these, statements that are both general, and
those which are also directed toward specific application to agricul-
tural markets. A central purpose of this dissertation is to build a
model that yields a way of discussing bargaining and negotiated pricing
in an orderly way. It has been indicated that considerable emphasis
will be placed on the semantics of the substantives in the model. It is
in this area that the value of the model will be asserted.

The balance of this chapter will be concerned with a definition of
bargaining power and the explanation of the impact of costs on prices

that are determined by negotiation. Before proceeding to this, however

 

(40) Allan M. Cartter, op. cit., p. 124, William Fellner, op. cit. ,
p. 25, and J. Pen, "A General Theory of Bargaining," American Econ-
omic Review, Vol. 42, March, 1952, as cited by Cartter, op. cit., p. 123.

 

 

(41) Allen M. Cartter, op. cit., pp. 119-120.

84

a summary is in order and a brief digression on the peripheral matter
of explaining the "eleventh" hour agreement.

Assembling the previous statements in the model it can be stated
that:

1. By definition Ai S Bi and Si S Ei’ hence, if at some point
An = En' then Bn = Sn at some point in time up to and including _r_1_. It is
a hypothesis that the perception of heavier estimated future costs to
non-agreement and increasing dis-utility for tactics necessary to
achieve aspired prices, shortens negotiations.

2. If Ci = Di but Dif Di' and Ci )5 Ci' then any bargaining is
contingent on the existence of these errors. Increased information
by each person about the alternatives open to the other tends to
shorten the time period for negotiations.

3. No agreement will be reached by negotiations if, for all
offers _i_, Ci < Di' since by definition of C1 and Di’ alternatives to

negotiation would be more feasible. This, in turn, implies that if

negotiations are considered feasible, then Di' S Ci and D, S C_'.
1 1

 

4. It is tautalogical, if the model is considered as a deductive
system, that the negotiator which faces the least perceived costs to
non-agreement will be able to conclude agreement closer to his
maximum aspirations. It does not follow, necessarily, that these

maximum aspirations are related to specific profit levels. It was a‘

85

major conclusion drawn by Siegel and Fouraker that an "unreasonable"
negotiator by conveying the impression that he was irration—

ally" adamant could impose costs on the other person such that the
"unreasonable" or unduly adamant negotiator could force agreement

on his terms (42). This could occur even if the other person perceived
the unreasonable negotiator's position to be basically weak. To put
this another way, it is possible for a person to agree to terms less
desirable than his position would indicate, simply because he is unwill—
ing to sustain far less cost than he is in a position to inflict. This is
symbolized in the model by heavy discounting due to dis-utility of
tactics to achieve maximum aspirations (A1 or Ei) but light discounting
due to estimates of the retaliatory power of one's opponent.

Ignoring for the moment that it may not be desirable for either
person to push his opponent to his minimal valued price in negotiations,
it can be hypothesized that the buyer will attempt to reach agreement
at Di' and the seller at Ci'. It has been postulated that these goals may
not be reached due to the discounting to Ai and 131' This can lead to the
explanation of the phenomena in which a decision is not reached until
the very last minute before the threat of economic conflict. The

reasoning is that until economic conflict before the next counteroffer

 

(42) Siegel and Fouraker, op. cit.

86

is a very real possibility, the costs of actual economic conflict do not
become an effective constraint on present decision. To put this in the
language of the model, the full effect of the costs of economic conflict
is not reflected in the value of the plan to engage in economic conflict
(that is its feasibility), until the probability factor approaches 1. To
illustrate, a milk dealer does not have to face up to the costs of
obtaining alternative supplies up to the point where his refusal to agree
means that he will have to actually pay these costs. This would be in
the face of a milk strike or the point after which he cannot implement
delivery of the alternative supplies. This suggests another hypothesis.
As information about the other person's alternative increases for each
person, and the interval (Ci - Di) becomes increasingly apparent prior
to the onset of negotiations, the actual negotiations will tend to occur
during a shorter time period and more closely to contract deadlines, or
expiration dates. Protracted negotiations would then be symptomatic
of the desire on the part of the negotiators for more information by the
probing action of negotiations, the absence of immediate costs as a
consequence of non-agreement, or a long list of issues that must be

sequentially settled before the final issue, price, can be negotiated.

BARGAINING POWER
The area for negotiations as indicated in the model is defined by

the interval (Ci - Di)' that is, the difference between the prices that

87

represent the minimal value offers beyond which it is more feasible to
abandon the plan to negotiate. A completely powerful seller then could
secure agreement at Ci' The completely powerful buyer could secure
agreement at Di. This implies three separate propositions under the
above model. First, the completely powerful person would have
accurate knowledge of the opponent's alternatives and the prices that
represent them. Second, the powerful person cannot be subjected to
costs to non-agreement imposed by the other person or nature. Third,
the powerful person would attach neither positive nor negative utility
or preference for engaging in the tactics for securing agreement on
his own terms.

Granting this, bargaining power can then be defined for the buyer
as: (C - B )/(C - D )and for the seller as (S - D )/(C - D),

n n n n n n n n
where agreement was reached in the 2th point in current time. This
defines bargaining power as a measure of relative strength as meas-
ured uniquely between two particular persons. Bargaining power is
measured as a function, ex post, of the next most feasible alternative
to negotiation. This can be to negotiate with another person, abandon
the plan to seek price agreement (bargaining) or abandonment of the
plan to exchange altogether.

As a further point, the definition implies that if, at a given price

verbalized as "the market price, " both persons perceive equally

88

valuable alternatives to negotiation, then neither has bargaining power.
This can be symbolized as Ci' = Di' and no negotiation will ensue since
the first offer will lead to immediate price agreement, and the plan to
negotiate will not be executed. This symbolizes the situation where
both persons approach an organized market as price-takers and the
alternative for each is the offer of the other person's competitor. The
recognition of this dependence of market power on the lack of the
presence of nearly equally valuable alternatives to particular negotia-
tions aligns the meaning of "competition" as the word is used by
businessmen with the meaning of the word as used by economists. The
word in both cases refers to the fact that neither party to a prospective
exchange can affect the price by entering or leaving the market. This
is true because to each party there exists a nearly equally valuable
alternative to attempting to elicit a counteroffer from any particular
other person. The leap from here, however, to the statement in market
structure analysis that atomistic numbers of buyers facing atomistic
numbers of sellers leads to conditions approaching perfect competition,
requires a second hypothesis about the relationship between numbers of
offerers and the independence of alternative offers. Under the postulates
of the model of this dissertation, the absence of market power requires
that only 923 other potentially more feasible independent alternative

exist. As an example, Ford can conduct itself in such a fashion as to

89

deprive Chevrolet of bargaining power over individual consumers by
matching any offer that Chevrolet may make, on the individual con-
sumer's scale of preference. This is not intended to refute the con-
nection between the perfect competition idealization and atomistic
numbers of firms. It is simply asserted that the second hypothesis
is necessary to make a hypothesis about this connection.

The relationship between bargaining power and the feasible
alternatives to negotiations become even more plain in the agricul-
tural market. It is entirely possible, if not typical, that the alter-
native to negotiations is accepting any price offered by sellers of
farm inputs and buyers of a farm output. If this leads to insufficient
revenues to maintain the farm as a producing unit, then at some
planning level the alternative to negotiation is to quit farming. It
follows from this that where returns to labor, management, and capital
accrue jointly to the same person, as it does to many farmers, he can
be forced to accept a price as an alternative to negotiation down to
that price that will lead him to quit farming. Further, the cost of
home—grown and consumed products and services will be included as
income in the rational calculations of the farmer. This situation could
reasonably be expected to arise in an area of adaptibility to a single
crop and to involve farmers with insufficient non-farm skills to earn

respectable wages in urban employment. The processor who is the

9O

proprietor of specialized facilities in a general crop area, especially if

he is not a young man, can find himself in the same powerless position(43).

THE SEMANTICS OF SUPPLY AND DEMAND

It has been stated above that past costs of production are not a
primary constraint on the range of prices that are potential points for
agreement in negotiations. This is a complex statement and the explora-
tion of its ramifications leads to considerations of the interpretation of
cost in the dynamic context and to the consideration of the semantics of
such terms as supply, demand, and marginal cost that occur in static
price theory.

From the model of this dissertation, it is seen that production
plans are chosen at a point in current time, and that this is a process
in which a given course of action is selected from a finite set of alter-
native plans. It would seem intuitively that there should be some com-
mon ground between the process of making the decision to produce the
extra unit up to the point where the last unit just pays for itself, and

the decision process of the TOTE model. Identification of this

 

(43) This is a statement that is also derived from the "fixed asset
theory" associated with Prof. Glenn L. Johnson in the current litera-
ture of agricultural economics. The statement as advanced by that
theory would say that a given source of human services will be retained
as long as the MVP of these services in their current use is greater
than their salvage value, or in the case of human labor, the next most
remunerative employment open to the individual. See Glenn L. Johnson,

"The*State of Agricultural Supply Analysis, " Journal of Farm Economics,
XLII, May 1960.

 

91

relationship is important since it furnishes a bridge between the
dynamic model and the static theory of price determination.

Of course, the other general relationship that indicates the
determination of price in the static theory is the marginal revenue
function which is a mathematical transform of the demand or average
revenue function.

The approach is made to exploring the concept of costs by
suggesting several meanings for the words supply and demand.

The word supply can have several distinct interpretations. The
distinction as it is currently made in economic theory is generally
called "length of run. " First, it has been assumed in the bargaining
model that at the time a price is being negotiated the quantity is fixed.
This may be represented in the conventional price-quantity plane by a
supply curve of infinite slope (vertical), and the negotiations are pre-
sumed to lead toward the selection of a point on that vertical line. The
bargaining model assumes a fixed quantity of the property being
exchanged.

A second referent for the word supply would be a schedule of
quantities of defined property that will arrive at some point in rela-
tionship to the market in response to a given price in the market. This
is a supply response curve. It is in effect the summation of, or
aggregation of, plans and the length of the planning horizon must be

specified.

92

A third sense is similar to the first but is an aggregate of the
quantity that flows into specific categories of disappearance during a
given time period. An example of this would be all apples that were
not left in the orchard or farm-located storage during the period
September 1 to March 31. This requires the specification of the
commodity, the specification of the categories of disappearance, and
the time period.

Analogous meanings for the word demand may also be found.
First, there is the quantity that is being demanded under the fixed
quantity assumption of the bargaining model. Second, there is the
aggregation of plans to remove varying quantities of a specified com-
modity from the market at various expected prices, over a given time
period. Third, there is the flow of goods into specified categories
of disappearance during a given time period.

The words supply and demand each taken in their first inter—
pretation coincide along a vertical supply or demand function that
indicates the fixed quantity being negotiated and the range of feasible
prices at which exchange of price will be consummated.

Using the second meaning of each word, the resultant graphic
representation would be the usual sloping supply and demand curves
that intersectiat a point at which the expectations of sellers agree

with the expectations of buyers. This determines price in a theoretical

93

system where all expectations are assumed to be met. It is a stable
equilibrium if lower prices induce some people to plan to buy more of
the property and other people to produce less, and if higher prices
induce some people to plan to buy less and other people to plan to
produce more. A world in which expectations are met is the stationary
state defined by the assumptions of static analysis. The concept of the
stable equilibrium requires the additional postulates about plans that
define the supply demand equilibrium as a point of homeostasis. The
stationary state defines the point at which expectations will be met for
both demanders and suppliers. It says nothing about how the point is
reached from some other price.

The third interpretation that can be given the words supply and
demand is indicated on the conventional graph by a point. This point
indicates the aggregate of the de facto transfers of property that have
taken place in the market between a specified group of persons or
exchangers. Economic analysts look at these points and try to estimate
the nature of the plans underlying the second interpretation of supply
and demand discussed above. This implies that the inference of
supply and demand relations from sales data requires assumptions
that the plans underlying buying and selling are relatively stable, the
homeostatic reactions are operative, and the recurrent aspects of the
planning leads to an accuracy of expectations that approaches the level

assumed in the stationary state.

94

These interpretations of the words supply and demand are not
incompatible, but some people use one more than another. They can
be sorted out by looking at them in relationship to the different aspects
of time that they involve. The supply response curve and its plan-
based counterpart that aggregates plans to buy are essentially esti-
mates. That is, they represent aggregates of quantities that would be
planned for exchange during a given chronological time period for each
given expected price which exists during some prior time period. Or
conversely, the implication is that for each quantity there is a price
such that if it is expected during some future period, this quantity
will be either supplied or demanded. Recognizing that marginal cost
reflects the decision to plan to engage in production up to the point of
zero marginal net revenue, these response curves are the referents
for the supply and demand functions used by economists. They are
formal static constructs under the assumptions which align them with
the stationary state.

The points or supply demand intersections that are the data in
empirical price analysis, in effect, aggregate total revenues that are
transferred from buyer to seller for the sum of quantities of specified
property in specified transactions. In the stationary state where
planning is done with complete accuracy of expectations, this is the

supply demand intersection where the sum of quantities at a given price

95

agree exactly. In the "real world" this point reflects agreement of
plans; but, in the absence of the assumptions made in statis analysis,
there is no procedure for establishing the other points that are presumed
to exist on the supply and demand curves. The time involved in this
interpretation is current time. The point reflects the sum of money
transfers made at discrete points on a chronological time scale and
within a given time period.

The first interpretation of the words supply and demand, that
implied by the model of this dissertation, draws the other two inter-
pretations tOgether. Relying on the assumption that the price is the
last issue to be settled in a bargained transaction, it may be asserted
that the quantity is fixed and negotiation establishes a point on what
may be visualized as a vertical supply function. Over a time period
one may add up quantities sold in whatever categories of transactions
that the researcher may deem appropriate. The revenues may be
aggregated and divided by the quantity. This yields a point on the
conventional price-quantity graph representing average revenue,
associated with some composite "batch" of property. With respect
to the bargaining model, this point may be interpreted as a supply-
demand intersection on a vertical supply function. The composite of
quantities that was defined to establish this point, however, is not

composed of homogeneous product but is in fact a pattern of distribution.

96

To illustrate, the point that represents the total revenues accruing to
farmers for all processing apples in Michigan in the fall of 1961,
represents, in one figure, all grades of apples. It is possible to
proceed from this to the statement that the word supply can refer to
a fixed quantity with a specified distribution pattern. It is then pos-
sible to reconstruct a demand curve of the plan-based type by asserting
that such a function is the locus of all points of average revenues
presently estimated to accrue at future alternative levels of quantity
appearing in specified categories of the property. If the quantity
includes all storage stocks and the revenue includes imputed value,
then the "demand" is represented by a point on a single fixed supply
schedule. This view is not restricted to agriculture since a produc-
tion period can be defined and all product of positive value used as a
basis for calculating revenues. It is characteristic of agriculture
that "a crop" is defined as a fixed quantity if inter-year carry over is
included as supply. It is hypothesized at this point, and demonstrated
in a later chapter, that the point of supply-demand equilibrium is a
point of homeostasis in which the reaction is based on deviations
from an optimal distribution pattern, e. g. , maximum revenue con-
sistent with _X_ bushels in storage. It is asserted that this is the
referent of the word supply to the business person. This is the ele-

mentary statement that sellers tend to view supplies of product in

97

terms of "finding a home" for a planned output that will yield revenues
according to some planned criterion that is set up to measure the
degree to which the goals of the firm are achieved. This is usually
considered to be profits as defined by the accounting system of the
firm. It is also suggested that the usual diagram used by economists
showing a positively sloped supply curve and an intersecting negatively
sloped demand curve is a graphic representation of the expectations
of sellers superimposed on the graphic representation of the expec-
tations of buyers, each based on estimated revenues accruing to
alternative discrete quantities. There is no reason to infer that the
intersection is a stable equilibrium unless an unequal quantity that is
planned for exchange at a given price leads to appearance of goods in
an undesirable distribution pattern and this in turn leads to reaction
to restore the equilibrium. To the extent that the reaction modifies
the values held about optimal distribution patterns the equilibrating
process can shift the point of equilibrium. This is asserting that
supply and demand functions are inter-dependent. It is further recog-
nized that advertising expenditures are quite often functions of expected
undesirable distribution patterns.

These statements are of considerable import to those who at-
tempt to estimate the plans to buy by assembling data based on past
buying. To the extent that demand is affected by attempts to maintain

a particular distribution pattern of fixed supplies, the persisting

98

impacts of the reaction to maldistribution must be recognized. An
example of this is the recognition in estimating the future demand
for Michigan cherries. of the present purchase of cherries by the
Great Lakes producers for the development of European markets.
The purchase was motivated in large part by excessive storage
stocks of frozen cherries. The increase of demand creation activi-
ties by producer groups, if effective, would indicate the use of
shorter time series in statistical estimates and increased attention
to estimation of demand by category of final product. To put this
another way, where the record of past transactions is used as data
to estimate future demand, some procedure should be used that
recognizes the demand creation activities that are associated with
the appearance of certain undesirable categories of supplies. For
a commodity such as apples, the necessary data does not currently
exist in a form that can be assembled by a public agency, a Single
firm, or a private agency. The question of who should gather such
data and by whom he should be hired, given the value conditions, will

be considered in a later chapter.

COSTS
It was stated in the previous section that marginal costs in the
dynamic model could be represented by the quantity associated with

present estimated future costs. In other words, the marginal cost

99

curve was a supply response curve in the dynamic context. It has
also been stated above that past costs are not a primary constraint
on the range of negotiated price agreement. These statements may
be drawn together in a form that demonstrates the function of price
as a vehicle for allocation of scarce means among competing ends.
One of the difficulties of handling costs in economic analysis
is the problem of measuring them. The businessman might snort at
this a bit and drag out the bills. It is true that out-of-pocket costs
are relatively easy to record. There are certain categories of costs,
however, that require the rather arbitrary procedure of imputation
to indicate them on a ledger. It is not wide of the mark to assert
that the costs to a firm are defined by the particular accounting sys-
tem used. For the purposes here, however, it is not necessary to
become so rigid. The assertion can be made that there is for each
firm, an order in which the inputs will be withdrawn in the event of
non-payment. Out-of—pocket costs are associated with those inputs
that will be the first to be withdrawn, e. g. labor, utility services,
raw materials, etc. Some others will not be withdrawn so quickly,
such as management services, or credit services. Still further, non—
payment to funds for replacement of deteriorating buildings or the
abandonment of payments for basic research or product development

and advertising will be the last such that withdrawal will cause

100

cessation of production. The ordering is unique for each firm. For
some, the withdrawal of payment to advertising would cause trouble
in very short time.

If it is recognized that expectations are not always met and a
firm does not always get what it anticipated for its product, it can be
stated generally that total revenue is not determined until after the
price has been agreed upon. It follows that the exact composition
of costs is contingent on the de facto distribution of revenues following
the sale of the product or commodity. To put it more briefly, costs
are not determined until after the conclusion of exchange. It follows,
in turn,from this that in an on-going dynamic context the impact of
costs on price is exercised through the reaction of input levels to the
distribution of revenues from past transactions. These levels affect
volume of production and present supplies, which are the result of
plans chosen at some previous point in time on the basis of price
estimates made at the time the plans were selected. Once the supplies
have arrived on the market, past costs are not a constraint on the
range of the prices negotiated after their arrival. These are rather
elementary statements but a good many of the assertions that farmers
are more or less at the mercy of the market arise from the situation
to which these statements refer. Farmers are not the only entre-

preneurs who are in this position. It is, however, characteristic of

101

agricultural production that plans are inflexible over long periods of
time, the capital assets are useable for the large part in specialized
production, and, as noted above, the returns to labor, capital, and
management all accrue to a single person. Under these conditions,
if the distribution of the revenues from exchange to the various cate-
gories of inputs is not at planned levels, reduced payment does not
lead to immediate withdrawal of inputs such that production is ter-
minated. It will not be significantly reduced unless revenues are
sufficiently low as to impair annual planning (43).

The significance of these comments on costs is that the model
that is advanced in this dissertation explains the basis for the allo-
cative function of prices. More importantly, it does this without the
necessity of invoking the highly restrictive assumptions of the static
theory. The model requires no more than the TOTE hierarchy which
is synthesized wholly from the cybernetic or TOTE hypothesis, and
the recognition of the two aspects of time. As an example, it is no
longer necessary to invalidate Say's Law solely by asserting that it is
not necessarily true that payments to inputs will result in the effective
demand necessary to remove the product from the market. It is more

explanatory to_ say that production takes time and the effective demand

 

(43) "Fixed Asset Theory, " again see footnote p. 90.

102

as estimated at the time the plan to produce was selected and executed
is not necessarily the effective demand when the product is placed in
the market. In short, expectations are not always accurate, and
people's preferences change in an unpredictable manner. The former
statement about Say's Law is simply dicta. The TOTE hypothesis
offers an explanation based on an assumption about individual human
behavior.

It will now be shown that even the rules defining property and
the conduct of groups acting as single economic actors can be

explained by the same cybernetic hypothesis.

CHAPTER IV

SHARED PLANS TO NEGOTIATE

Although there have been references to shared plans in the pre-
ceding chapters, the description of the plan to negotiate has been
largely couched in terms applicable to individual behavior. It is the
function of this chapter to demonstrate that the cybernetic hypothesis
is equally applicable to the explanation of the plan to negotiate where
the economic actors are groups of individuals. To phrase it differ-
ently, the hypothesis that behavior is plan-controlled furnishes a con-
ceptual framework for the orderly discussion of cooperative bargain-
ing associations. These are, in essence, groups of individuals who
have chosen to participate in the shared plan to determine the terms
for trade.

As a starting point, the necessary conditions for the exchange
of property are stated as follows:

1. Definition of the person.

2. The definition of property and the authority to exchange as

vested in two persons, one buyer and one seller.
3. Communicative contact between the two persons.
4. Plans to exchange held by each (person.

5. Formation of and agreement on a single unambiguous offer.

103

104

The description of the plan to negotiate as executed by a group

of individuals requires the description of the procedures by which each
of these conditions are met, within the framework of the TOTE model.

Taking the above conditions one at a time, first, the definition
of the person is simply the bargaining association as incorporated
under the laws pertaining to the exclusion of cooperative action from
designation as criminal conspiracy in restraint of trade.

Second, the definition of property and the authority to exchange
requires some procedure for establishing the joint control of the
property to be exchanged by the group and the delegation of the author-
ity to the spokesman or offer-maker. This is a matter of the con-
tractual relationship between the group and the group member.

Third, communicative contact requires that all components of the
communications process be present. The senders and receivers are
defined as persons. The messages that are considered include offers.
The contact is contingent on code and channel (44). The code is
assumed to be a common language and monetary system. The matter
of channel is more complex. One of the primary battles that a newly
formed agricultural producers' cooperative faces is the recognition

of the association as the bargaining agent for the producers as a group.

 

(44) The Source-Message-Channel-Receiver model is assumed.
See David K. Berlo, op. cit.

105

The persons may exist; the question of linking them by a channel for
transmission of offers is quite another problem.

Fourth, the plan to exchange by the group means the formation
of a shared plan to exchange that integrates the individual plans to
exchange. This also implies not only integration and sequence per
se (MAP), but also shared plans to select plans (PSP), and group
learning and information processes (LP).

Fifth, the formation of and agreement on a single unambiguous
offer requires that some procedure be formed under existing law for
the resolution of varying and often conflicting interests within the
group such that they can perform as a single economic actor. The
formation of the single offer is assumed to represent the selection of
the single most feasible offer, and implies the scaling of group pref-
erence on a value scale. The necessity of code in the transmission
of the offer to the other person requires that the group jointly express
preferences on a cardinal scale of preference, apart from any assump-
tions about the underlying and unobservable preference function. This
scale is usually the equal interval scale indicated by the monetary
system.

The general procedure in the remainder of this chapter is to
examine the relationship of the individual to the group in the imple-
mentation of these conditions for exchange within the three programs

that have been assumed to jointly control human behavior.

106

MAP - - PLANS INTEGRATION

The concept of the Main Activity Program (MAP), as applied to
groups, is the control process in which multiple plans being executed
by the individuals at lower hierarchical levels are integrated into
some larger single course of action. This program is concerned
with sequence per se.

Under the TOTE hypothesis the motivation to act or execute plans
has been assumed to arise from the control process bearing on some
higher level plan. To illustrate, the motivation to reach agreement
on the price for a commodity arises from the position of the TOTE
"bargain, " in the plan to exchange.

The functioning of the MAP in group behavior may be best seen
if it is supposed for a moment that the PSP and LP are non-functioning.
The resulting behavior could best be described as fully "programmed. "
The written prototype of this behavior would simply be a list of in-
structions, fully detailed from the beginning and inflexible in the face
of any contingent reaction. This is even more restricted than the
programmed behavior described by Simon (45). Such a program would
simply stall if Exit criteria were not met in the execution of the inflex-

ible plans and in the absence of controlling feedback. The instructions

 

(45) H. A. Simon, "The Role of Expectations . . . , " op. cit.

107

would simply indicate what is to be done next along a given time scale.
The basic constraint on such programming is that activities that
involve physical movement preclude an object being in more than one
place at a given time. On the other hand, the execution of a single
plan may advance several other plans simultaneously. As an exam-
ple, the inventory of the modern supermarket is such that one may
advance the plans to obtain food, plant the garden, care for one's skin,
and wash one's clothes at the same time, by executing the single plan
to go shopping (46).

There is also the constraint of the physical impossibility of two
objects occupying the same space at the same time, which in turn
leads to the requirement that some acts precede others. As an exam-
ple, one must open the garage door before driving the car in.
Sequencing may also be dictated by convention which in turn may be
based on the impact of sequence on the purpose of the plan. As an
example here, one dons clothing in a specific sequence borne of the
purpose for which the clothing is worn. As an example where sequence
is contingent on the purpose of the plan, it is rather inadvisable to bale
hay that hasn't been properly cured. It is intuitively clear from the

consideration of the difficulty that would be encountered in trying to

 

(46) Miller et al. , op. cit. , p. 95.

 

108

coordinate behavior into such a rigid internally consistent system,
that increases in flexibility ease the problem of plans integration.

The relevance of these remarks to agricultural markets is that
farm plans are characteristically composed of many inflexible sub-
plans. The integration of production plans on the farm is a very
complex procedure. It is further complicated by the presence on the
farm, and the involvement, of the farm family. There is the constant
and intimate interrelationship between the conflicting goals of con-
sumption and production or capital formation. The complexity of
such relationships is very apparent to extension specialists and those
agricultural economists whose specialty is farm management. Com-
pound this further into a cooperative plan to integrate the sales plans
of several farms and the often repeated statement that "farmers don't
pull together" is better understood.

The formation of the group plan to sell the output from several
farms raises problems of the coordination of movements of physical
commodities. At one end of a control continuum is the very minimum
of constraint where many farmers bargain cooperatively with several
buyers such that there is considerable freedom to choose the preferred
plan to physically handle the commodity. At the other end of such a
continuum is the situation where the bargaining unit actually furnishes

transportation services or maintains control on the transportation

109

services such that for all practical purposes the association assumes
physical possession of the commodity. Along another dimension
there is the range of situations, from the general farm that only
sells one crop cooperatively to the one-crop farm where the entire
output is sold to or through a cooperative. It has been asserted that
the bargaining cooperative does not buy and sell farm commodities
but simply acts as the bargaining agent for a group of producers who
bargain cooperatively. It is argued here that, upon examination of
the required control and information processes, the difference is
largely a matter of the degree to which the producers may find it
necessary to handle the commodity cooperatively to meet their goals.
This is closely related to the power to withhold and the decision on the
part of recognized bargaining associations to furnish services for
themselves that enhance individual gain. It may be convenient to make
the distinction between bargaining cooperatives and selling coopera-
tives, but both are shared plans and the difference is contingent on
the nature of the plans selected, not of form as behavioral units.

One further observation may be made, that the MAP as applied
to groups may be conceptualized as that system of rules that operates

in the absence of management plans selection.

110

PLANS SELECTION (PSP)

It is difficult to deal very extensively with the matter of sequence
without talking about the problem of which plan to select from the finite
set of plans known to the person. The consideration of plans selection
at the individual level involves the very broad field of decision theory.
It is not the intent of the discussion to generalize about procedures that
people use for plan selection. The assertion is that plans selection is
an aspect of human behavior. The unique property of the TOTE hier-
archy, however, is that it provides a means of discussing plans selec-
tion that does not impose a theoretical barrier when passing from con-
sideration of the individual to the consideration of the group of
individuals. To recognize disciplinary labels, once one moves from
the individual plan selection process to that of groups, the subject
matter area comes under the increased scrutiny of the social psychol-
ogists, the sociologist, and the political scientist. When the exchange
and valuation of property become involved, the economist directs his
attention to this behavior.

Once the plans selection process involves a PSP in which more
than one person is selecting a single course of action for a group, the
process of plans selection becomes a political matter. The question of
which rules shall be used to select plans is no longer a matter of some

subjective choice procedure for a single person, such as maximization

111

of expected utility. The question of which rules to use becomes a
matter of the form of the legal system. A constitutional convention
at the state or national level represents the execution of a shared plan
to define the rules within which the selection of shared plans and the
delimitation of individual plans are carried on. The cooperative or
shared plan to determine the terms for exchange of property are part
of the shared plans that must operate in this environment. These
public rules also prescribe the form of the organization by-laws
which are in turn the rules for shared plan selection within the
organization.

Within the limited number of cooperatives observed in connec-
tion with this dissertation, it was found that election of delegates or
local representatives, the designation of spokesmen, the formation
of single offers, the acceptance of offers, and the specification of
policy are all executed by majority vote.

The complexity arises on the other side of the exchange. Under
the provisions of the Sherman Anti-Trust Act and its subsequent
interpretation in the courts, firms which are not of cooperative form
and not farmer- or consumer-owned are not allowed to act coopera—
tively as persons. The balance of power that this imposes in the
market is largely the product of interpretation of evidence as to the

nature of the inter-firm information flows. There is a large area of

112

law relating to collective action as yet undefined, in spite of the
existence of a body of jurisprudence extending back to the passage
of the law in 1898.

Among the cooperatives observed, it was found that the forma-
tion of the price offer was a choice process executed by a board of
directors or sales committeemen. The procedure was a matter of
voting on a motion to make a specific offer after a second thereto, and
a discussion. This may be asserted to be a multi-person form of the
process that goes on in the PSP of the individual, although neither the
logical form nor the rules are accessible. The offer is then encoded
in a written message and presented to the individual other persons in
the market under public laws that proscribe certain information flows.
Although the current law forbids cooperative bargaining by groups of
non-agricultural firms, the author would assert that this is partly
illusory. Individuals or individual firms bargaining in a common
information environment where the association on both sides is volun-
tary is basically a squaring off of groups operated under a choice
mechanism that conforms to a majority decision weighted by the volume
of the commodity that each group member controls.

The hypothesis of the preceding chapter, that the range of
feasible offers is limited by the presence of independent, nearly equal

valued alternatives, is valid in the group context. The cooperative or

113

shared plan to bargain, which may or may not mean negotiations, is,
in essence, the execution of a shared plan to limit the range of alter-
native offers to the other person, and to set up an alternative to the
other person. These are two separate operations. The first is
implemented by the contractual arrangement with members not to
accept terms other than those specified by the association. The
second is implemented when the association assumes responsibility
for disposal of the commodity. This latter action includes the shared
plan to limit production, or, to put it differently, set up some rule
whereby the plan to distribute or dispose of undesirable stocks is
executed at the individual member level. Evidence of these functions
is cited in the next chapter when the discussion turns to the problem
of finding real world referents for the limiting and most feasible
prices defined in the formal bargaining model.

It follows from these statements that if the majority vote of a
farmer bargaining cooperative does not have the weight of withholding
power behind it, it will tend to fail in gaining recognition. This
depends, of course, on the knowledge of the withholding power by
the other person. Similarly, the public announcement of offers by or
tacit cooperation of non-farm buyers must carry the weight conveyed
by the absence of the independent alternatives to sellers or such

announcements will be ineffective.

114

These statements may be summarized by saying that the PSP
function in the shared plan to establish the terms for trade of agricul-
tural commodities can be characterized as being under the control of
the assent of sufficient members as can jointly establish price leader-
ship. The PSP function itself is spelled out in the by-laws of the
associations, and by the status of individuals in collective action
before the law.

Under the foregoing postulates about the plans selection process,
price determination by negotiation stands at the conjunction of the
impact of plans selection from three sources. First, there is the
individual plan to participate in the plan to bargain cooperatively.
Second, there is the selection of the plan to bargain, possibly to
negotiate, and the shared plan to select the offer or accept an existing
offer at the group level. Third, there is the participation of the
individual, and usually the group in the governmental processes that

define the context for negotiation and possible economic conflict.

INFORMATION PROCESSES -- LP

The information processes are that portion of the model of
behavior proposed in the preceding chapters concerned with the feed-
back control on plans execution. Conceptually the Test phase must
somehow be modified by events in the environment if the Test is to

signal the successful completion or the failure of a plan. This

115

modification process permeates the TOTE hierarchy at all levels and
hence is as complex as the structure of human behavior itself. For
the purposes of discussion, however, the procedure will be to
examine the information flows in a shared plan to exchange in relation
to the five necessary conditions for the consummation of exchange.
Further, the information will be classified by source and receiver,
and by direction and intent.

The information process within the individual is largely inacces-
sible to observation. When it becomes necessary for a group to act as
a single individual, however, messages are sent between the group
members. There are conversations, discussions and often a great
deal is written down. The information flows that lead to the conduct of
a bargaining association as an individual assume a number of visible
forms. There is the discussion between group members, there is the
flow of information from member to representative, and there is also
the flow from the organization to the individual member. This last
flow is usually implemented by both the written statement of an organ-
zation publication and by messages transmitted through the local
representative. The information flows that are pertinent to the forma-
tion of the individual are comparable to the individual talking with

himself.

116

The information that flows from member to the board of directors
and to the association management is the basis on which the majority
vote is exercised in plans selection. Of course, it is channeled through
the local representative. The kind of information that proceeds out
from the association can be classified into three categories. First,
there is the reporting function. That is, there is data pertaining to the
operation of the association and market data that is basically supplied
as a basis for individual plans selection. There is a second kind of
message that is directed toward goal formation. This is directed
toward the value system of the member, e. g. , let's-all-pull-together
types of messages and those serving to establish uniform knowledge of
association goals. Third, there is the message that is plainly designed
to expose the decision making process of the association to the mem-
bership, e. g. , "this is what we have decided and here is why. " It is
hypothesized that there is a major shift in the type of these messages as
an organization gains recognition and matures. In the initial phases of
the organization the messages are largely directed toward establishing
the value system of the shared TOTE "bargain. " The belief system
is the knowledge of market conditions and organization capabilities
which are rather ill-defined in the absence of operating experience. As
the organization matures, the goals are rather well established and

known and the data of the belief system and the knowledge of the

117

feasibilities of shared plans accumulate from experience. The internal
messages reflect this change as they become increasingly concerned
with data.

It is stated then that the formation of the person in the shared
plan to exchange can be conceptualized as the construction of a large
multi-person TOTE. The initial construction involves the establish-
ment of a stable set of goals, the establishment of the rules for the
control processes, and the implementation of the information flows
for the purpose of modification of values, beliefs, or both. Since
association of individuals with the association is voluntary, it is de-
fined by the extent to which the goals are established, and there is a
two-way flow of information between member and group. Within the
limited number of organizations observed, it was noted that the per-
suasive content of the internal written messages dropped and the
reporting of market data increased with the age of the organization.

The control process that delegates the authority to a spokesman
defines the source of messages that proceed from the group, that is,
the person in the market to other persons, be they other bargaining
associations or processing firms. Among these messages are the
overt offers and the messages that establish the communicative contact
external to the association. This is essentially one—way communication

since the receivers in the reverse direction are the individual group

118

members and the information that is received is aggregated via the
plans selection processes. The information flow that is concerned
here may be expected to be essentially persuasive, that is, it is
deliberately intended to alter the belief and value systems of people
external to the group.

The importance of this kind of information flow is indicated
by the bargaining model. It will be recalled that the constraint on
the range of feasible offers that would appear in the market was pos-
tulated to be, not the prices that represent the points beyond which
negotiations would be non-feasible, but the mutual estimates of these
points. It was also pointed out that there is a loss involved from
errors in the perception of the limits to feasibility. It becomes a
tactic, therefore, if it is desirable to keep initial offers from being
made close to one's own alternatives to negotiation, to try to convince
the opponent that the minimal valued prices are at more favorable
levels. Also concealed in these tactics is the manipulation of the
context of negotiations and conduct such that desirable inferences are
made by the other person about the willingness to yield.

The consideration of the communicative contact between persons
in the market has been dealt with in the discussion of the matter of
recognition. The information flows have been interpreted as pro-

ceeding from the spokesman to the membership or their elected

119

representatives. This contact is essentially defined by the extent to
which the communicated message is received. It has been noted that
there is a problem of law where one person in the market is a bar-
gaining association and the other is a group of individual business
firms. It is interesting to note that there is the continuing question in
the negotiations between Michigan Milk Producers Association and the
dealers in Detroit and Southern Michigan, of whether or not it is legal
for these dealers to meet in a body to negotiate with the association.
The dealers contend that such a meeting is illegal; and in the 1962
negotiations, only a small proportion of the dealers showed up for the
negotiations session. The contact in this case amounted to the trans-
mission of the price demands of the association to the individual firms.
This kind of contact can best be described as the individual decision

by persons on one side of the market not to negotiate. That is, the
dealers decided not to try to jointly or individually elicit a counteroffer
from the Association. It is also interesting to note that B. I. Freeman,
Secretary-Manager of the Great Lakes Cherry Producers Cooperative
Marketing Association, has termed bargaining as an anachronism and
visualizes the procedure as one in which the association chooses a

price which it seeks to establish. Again the decision, under the

definition of negotiations, is to not negotiate (47).

 

(47) B. I. Freeman, "Pricing Raison d'Etre for Bargaining
Association, " mimeo, presented at the convention of the American Insti-
tute of Cooperation, Berkeley, California, August 10, 1960.

120

It is the opinion of the author that communicative contact in the
market will be largely informal and between the associations and the
firms they face as individuals. This is asserted even beyond the
requirements of anti-trust legislation. One of the major concerns
of processing firms is not the level of prices but the relationship of
the prices that he must pay relative to those of competitors. The
major concern of the processor is then going to be maintenance of
market share unless his operation is sufficiently close to marginal
that the price demands of the association will force him out of
business. This means that the farmers' association is going to be
picking prices and the processor, dealer, or broker is going to be
picking quantity. This will be seen, in the next chapter, to affect
the definition of supply and demand as seen by association manage-
ment and raise the problem of supply control for the association.

With regard to the fourth condition for exchange, the use of
the TOTE "bargain" as the model of the bargaining association
implies the formation of plans by the association. The process of
plans selection has been described as has the flow of data in this
process.

The fifth condition for exchange, which is agreement to terms,
arises from the interchange of messages at the point of communi-

cative contact which is the third condition for exchange proposed above.

121

THE CONTEXT OF INFORMATION FLOWS

It has not been the intent here to catalogue all of the kinds of
information or intent of messages as they appear in negotiations. The
purpose of the foregoing is to demonstrate that the TOTE and the plan
are useful concepts for the orderly discussion of the information flows
that do occur in bargaining and negotiations. It is postulated that the
basis for the choice of offers, and all of the other acts attendant to
exchange, is the inferences of "what causes what" from a complex of
interacting behavior of people.

One of the issues that generates a lot of controversy in the
discussion of cooperative marketing is the question of "fairness" of
permitting agricultural producers to combine in groups on a local,
state, regional, or interregional basis for the purpose of determining
the terms for exchange for their product with consumers or inter-
mediary firms. Agricultural producers are exempt from the anti-
trust laws under the Capper-Volstead Act. This privilege of collec-
tive action is denied the intermediary firms. Aside from the argu-
ments about the equity of such laws it is important to note that such
laws are actually directed at the specification of the information flows
between firms. It would be safe to say that the extensive body of
litigation pertaining to anti-trust prosecution is concerned with

defining the line between similar action on the basis of common

122

information, and action that is designed to collectively restrain the
range of alternatives open to the other person(s). The legal profes-
sion is then saddled with the task of ferreting out and defining the lines
between persuasive and non-persuasive messages, and the definition
of the lines between effective and ineffective sanction that renders
persuasion effective or ineffective. This casting of bargaining power
in terms of the operation of the information processes within groups
does not indicate a mechanism for determination of equity, but it

does indicate a procedure for the description of the position indicated
by court decisions. The reaction to feelings of inequity bears on these
decisions via shared plans to enact legislation which is the frame of
reference for the operation of the judicial system. The referent here
is the shared plan that is a government.

The assertion that a position of equity is identified by the
interpretation of rules governing the content of messages and exer-
cise of physical force, leads directly to the hypothesis that the solu-
tions to conflict of interest in establishing the terms of trade are in
large part determined by the legal context of the negotiations. This
does not mean that the price can be predicted from examination of
the legal context. It does mean that the approximate solution could
be predicted if some function relating the legal context to the present

estimates of future costs of non-agreement could be established.

123

This does go on to some extent. The question was asked of a coop-
erative manager, "Do you feel that within the range of solutions that

is deemed possible prior to negotiations, there is one that appears
markedly to be the most likely compromise ?" The negotiator's
answer was in the affirmative and tied to comment on the necessity

of yielding to avoid the charge of unilateral price determination or
bargaining in bad faith. It is hypothesized that the perception of a
most likely settlement increases as the value difference between
minimal acceptable offers decreases down to coincidence of perceived
minima where bargaining does not ensue. This last sentence is simply
a restatement of the proposition that the perfect market idealization
represents the coincidence of minimal acceptable offers due to the
accurate perception of the existence of at least one independent equally
valuable alternative to each of the opposing parties. Negotiation is
precluded in the perfect market as purposeful behavior, under the

assumption of perfect knowledge.

SUMMARY

In summary, it is possible to interpret the various facets of the
price or offer formation process within bargaining groups in terms of
the plan concept. There is no attempt to classify bargains, or bar-

gainers, according to the nature of the processes. The assertion is

124

simply that each of the components of the plan hierarchy are identi-
fiable in the overt manifestations of groups of individuals who seek

to execute plans to establish terms of trade. The MAP is seen in the
sequencing that is directed by executive function. PSP is seen in the
process of decision making by both executive function and the rules
governing the expression of a single choice by a group of members or
their representatives. The LP function is seen as the composite of
information flows, persuasive and non-persuasive, between persons
engaged in negotiations, within the bargaining associations, and be-
tween firms. The extent of permissible communications and intent

(channels and content) are defined in the legal context of the negotiations.

CHAPTER V

THE DEMONSTRATION OF SIMULATION

A primary objective of this dissertation is to demonstrate that
the TOTE concept, as proposed by Miller 53:31. and extended for the
present purpose, is the basis for a theoretical model that simulates
real world bargaining and negotiation. The previous chapters have
been directed at forming the model. It is now appropriate to demon-
strate that the model does simulate overt manifestations of the
process.

Tests that determine whether or not simulation has been
achieved are generally of the form in which the data and the output
are submitted to a panel of experts. These in turn may be required
to pass judgment according to some set of rules as proposed by Star-
buck (48), or meet the criterion that at least one judge fail to dis—
tinguish between data and the output of the model (49).

As a step toward that criterion, the following chapter will
attempt no more than to establish the link between the substantive
terms of the model and some referents in verbal and written accounts

of bargaining and negotiation. The primary source of such data is

 

(48) William H. Starbuck, op. cit.

(49) Editorial comment on the author, William H. Starbuck,
Behavioral Science, Vol. 6, No. 3, July, 1961.

 

125

126

the messages sent from the cooperative bargaining association to its
own membership. Reference is also made to excerpts from private
conversation for which, due to the nature of the content, the sources
shall have to remain anonymous.

It is the general approach of this chapter to first examine the
referents in the data for the bounds to the range of prices which are
potentially agreeable to both persons. The next step is to seek evidence
of the pressures toward agreement that were described in Chapter III.

Finally, the data will be examined for points of homeostasis.

LIMITS TO FEASIBLE PRICE OFFERS

It has been postulated that the limits to feasible offers in
negotiation are imposed by the existence of prices beyond which it
is more feasible for the person to not negotiate. These have been
labeled Ci and Di in the model. The range of prices that fall between
these minima is the range of acceptance at point of time i. The fol-
lowing quotation and description of the final stages of negotiations are
cited and contain reference to such limits. The principals are John
Stewart, President of Twin Pines Dairy, Detroit, Michigan, and
Glenn Lake, President, Michigan Milk Producers Association. The
object of negotiation is the premium per hundredweight to be paid to
producers for Class I milk (milk for fluid use) during the period from

February 1, 1961 to January 31, 1962.

127

Stewart: There are only two possibilities for settlement--
a knock down drag out fight or arbitration by a
disinterested third party.

Lake: You are saying that you cannot or will not settle.

Stewart: You are asking for a higher price than last year.
An increase is not justified.

Lake: We are asking 27¢ on Class I over last year. This

is not exorbitant or unreasonable. You have increased
costs but so have we. We won't take any cut. If you
refuse to move from your decision, we will have to
direct our actions accordingly. You leave us no choice
but to recommend the strongest possible action.

Stewart: If the sales committee decides to come close to our
$1. 33 - $1. 73 offer, we will meet with you again.
Lake: You may as well conclude that the Sales Committee

will not make another offer if you say that you will not
negotiate from $1. 33 and $1. 73. If you stand by that
position you may as well not expect to get milk on
Monday. As far as I am concerned these negotiations
are closed.

This verbal exchange was followed by the following events:

1. . . . . the Sales Committee . . . directed that dairies
be sent an ultimatum to pay the price demanded by MMPA or get
no milk after February 1.

2. . . . dealers asked to meet with the Price Committee
(MMPA) Friday afternoon and tried to reopen negotiations with

an offer to pay the same negotiated premiums as last year
($1.43 - $1.83).

3. Lake told dealers their offer was too little and too
late.

4. Friday night, telegrams were sent to all Detroit
dairies advising them of the Sales Committee ultimatum.

5. By late afternoon on Saturday, a large number of the

medium and small size dairies agreed to Association demands.
The big four, after several had made an effort to obtain milk
from other sources in and out of Michigan . . . conceded to the
price ultimatum by late Sunday afternoon [January 31] (50).

 

(50) The Michigan Milk Messenger, February, 1960.

 

128

The price Ci was postulated in the model to be the maximum
above which the buyer was unwilling to agree. It is noticed in this
case that it is the price demand of the seller. The alternative that
was explored was the attempt to buy milk from other sources. The
price D1 is postulated to be the lower limit below which the seller will
not agree. In the above case any price below that of the previous year
was stated as unacceptable and a higher price was backed by the
decision to engage in economic conflict. In this latter case the
alternative to negotiation was diversion, which may be interpreted
as a case where the alternative to negotiation was furnished by the
shared plan to divert to another buyer represented by the various
outlets that could be developed. It may be inferred that the success
or failure of such ultimatums is dependent on the presence of such
alternatives. The dealers could be pressed no further than the price
of alternative supplies. The selling cooperative could be pressed
no further than the composite price offered by diversion outlets.

Similar constraints can be seen in the following excerpts from

Tart Talk, Great Lakes Cherry Producers Cooperative Marketing

 

As sociati on:

Some processors accepted our price and contract but
returned blocks of tonnage back to the Association, saying
they did not need that much tonnage at our price. (We sold it
to other processors.)

129

Not a single processor in Western New York (West of
Rochester) would accept our price and forced the association
to process its own members' cherries at a contracted price
of 5-7/8¢ per lb. for processing . . . .(51)

The alternative associated with Di in the first case is the
presence of alternative buyers. In the second case it is the associa-
tion itself assuming ownership and functioning as a processor.

To cite still another example, one may find the limits to nego-
tiation in the following statements by Kenneth Robinson of the Eastern
Fruit Marketing Cooperative, Inc.

Complete victory as indicated by processor recognition
and price negotiation is analyzed as having been prevented by
three factors:

. . . Processors were able to find too high a proportion
of their needs outside of the bargaining group for it to be
effective. . . . The inability to sufficiently interest growers
in other areas of bargaining. This prevented:

a - Being able to assure Appalachian processors that
those located elsewhere couldn't buy much cheaper
fruit, and

b - The grower comfort of protection from the device of
4-state processors going to other areas to secure the
fruit supply that would otherwise come from bargain-
ing association members.

. . . inability to interest growers in other areas in bargaining,
remains the knottiest of the three (problems).

Also at the individual grower level:

Some members will be lost due to sole dependence on a
processor and inability to resist his tactics. Others are simply

 

(51) B. I. Freeman, Tart Talk, Great Lakes Cherry Producers
Cooperative Marketing Association, September 10, 1959.

 

130

going out of the apple business to keep from going broke

completely (52).

In this case the limit Ci is imposed by the presence of compe-
titive supplies but on an interregional basis. The lower limit Di is
represented in this case by mention of individual growers ceasing
production activities. That is, the most feasible alternative to
accepting the offer in the market is to abandon negotiation, abandon
bargaining, and abandon production. This is represented in the model
by the invoking of stop rules through three levels of plans hierarchy,
due to a lack of feasible plans.

In summary, there are several kinds of limiting factors which
are mentioned as constraints on the range of prices that are feasible
for agreement. Among them there are:

1. The upper limit beyond which the buyer need not go due to
the presence of at least one independent alternative seller.

2. The upper limit beyond which the buyer cannot go in pur—
chasing inputs due to the presence of supplies at equal or lower prices
that are available to competitors.

3. The upper limit beyond which a substitute product or

activity is more feasible.

 

(52) Kenneth Robinson, "Progress on a Bargaining Association To
Sell Processing Apples in Appalachia, " Proceedings, 105th Annual
Meeting, The New York State Horticultural Society, 1960, pp. 77-86.

 

131

4. The lower limit to price beyond which the seller need not go
due to the presence of at least one independent alternative buyer.

5. The lower limit to price beyond which the supplier will cease
production.

6. With respect to group negotiations and bargaining, there are
upper and lower limits to the range of acceptable prices imposed by
the inability to get a majority vote beyond these limits. This refers
to the situation where a group offer is minimal because anything less
valuable could be achieved by individuals acting separately and the
group would dissolve. This is allied to the offers that may be made
by persons opposing the formation of bargaining groups by granting
more favorable terms, thus making the individual plan to participate
in the shared plan non—feasible. It is also observed that there is
extreme reluctance on the part of bargaining groups to agree to less
favorable terms than existed in the prior contract.

Another set of limiting prices in negotiation is represented by
the mutual estimates of the bounds to agreement held by the other person.
These limits are represented in the model by Ci' and Di'. The price
Ci' is rather easily identified in the intra-association messages of the
bargaining cooperative. One uniformly finds reference to competitive
supplies, estimates of derived demand, and in general the detailed

economic analysis that is data to the plans selection process of the

132

organization. One would expect the counterpart of this activity on the
part of processors, dealers, or brokers, whichever happens to be the
buyer in a particular industry.

In informal conversation about these limits, however, there is
a tendency not to talk about such extremes since there are factors
that tend to hold the range of acceptable offers away from the alter-
natives to negotiations. In the model this is described by postulating
that the levels of maximum aspiration, Ai and Ei' fell inside of the
range bounded by Ci' and Di' due to the discounting of present estimates
of the future cost of sanctions that can be imposed by the other person.
Further, the overt offers by definition fell within the range bounded
by the levels of aspiration by an amount representing the discounting
due to self-imposed costs or the present estimate of the disutility of
conflict per se. It is reasonable to suppose that there is the consider-
ation of the costs of economic conflict although this is not usually
exposed to public observation. The more frequent reference to dis-
counting occurs with reference to that which is imposed by the public
interest. When costs of conflict were mentioned, it was usually in
terms of short term conflict and tactics. The awareness of third
parties is found in the following statements by Stewart:

We don't want the newspapers to say dealers and farmers

got together and set the price without the consumer having any-
thing to say.

133

you should not be afraid to defend your price to the
consumer.

Arbitration is still a part of our offer and any
statements to the newspapers about this situation should say we

did offer to arbitrate (53).

With the research facilities open to both the buyer and sellers it
would be expected that each party should be able to make a reasonably
close estimate of the outcome of negotiations. The alternatives to
negotiation are rather accessible, and although subjective discounting
or the precise impact of the prospect of economic conflict is unobserv-
able, they are not beyond rough estimation. It would seem then that
after definition of the minimal prices and the estimates of mutual
discounting, only a very narrow range should appear for negotiation.
To compound this there is the statement by Freeman that the objective
is to form a price demand and force its recognition, and, there is the
non-negotiation that preceded the January, 1962 MMPA price agree-
ments. The direct question as to whether or not the negotiator felt
that there was an obviously most probable price for agreement before
the start of negotiations produced an affirmative answer. Further,
the utilization of the data supplied by economic researchers to boards

of directors or sales committees seems to be a process where the data

with estimates of the consequences of various prices is considered and

 

(53) John Stewart, quoted in "They Said It Couldn't Be Done !" The
Michigan Milk Messenger, Michigan Milk Producers Association, Feb.,
1960.

 

134

a "best" price is selected by majority vote. It is a reasonable ob-
servation that what is happening is that the processor or dealer is
selecting quantity on the basis of the price demands of the producer
group and then taking advantage of the problems created by supplies
turning up in undesirable categories. It must be recognized that the
supplies of a storable commodity in the hands of a buyer is a supply
that is alternative to the purchase from producers. It is asserted

later that such supplies in the hands of producers can depress prices.

BARGAINING ASSOCIATION GOALS

The approach to the single offer that is agreed upon in nego-
tiation has been described in terms of what is not agreeable, that is,
the bounds to agreement. It has been suggested that the range of
possible agreement is further restricted by present estimates of future
costs to non-agreement. It has been pointed out, however, that quite
often it is incumbent on the producer organization to make the first
price offer and that when this is done, with some show of protest by
the other person in the market, the other person selects a quantity
on the basis of the price. To avoid an apparent contradiction with the
assumption that the price is fixed in negotiations, it is asserted that
the price negotiations are based on quantity estimates but subsequent
decisions about actual quantities exchanged can be based on the nego-

tiated price. This is the implication of the quotation from Tart Talk

 

(supra, p. 128).

135

There is evidence, however, that there are some points or
prices which develop that reflect homeostasis in the bargaining
environment. One has already been mentioned--the price of a pre-
vious contract. It is attached to maintenance of the bargaining asso-
ciation and the current management. An examination of a statement
of bargaining association goals by B. I. Freeman illustrates another
point of homeostasis. The following remarks are pertinent:

a marketing cooperative is . . . developed to handle
a single commodity or very closely related commodities which
are sold in the same market. . . . It becomes in essence a
decision-making body. . .

Its primary objective is to obtain for its membership the
highest returns consistent with current and prospective economic
conditions and the long run welfare of growers.

. . In contrast, today, so-called bargaining associa-
tions to be effective must be price leaders and must organize
the market in such a manner that its initial price announcement
is effective in the trade.

. . . the exchange of ownership of the commodity between
the grower and the processor represents a proportional allo-
cation of those consumer funds based on our best estimate of
existing market conditions and the estimated marketing conditions

for the coming twelve months.

On the production side, the funds so allocated will either
attract or repel the production resources of our members.

It is recognized that in agriculture, we cannot control
production so as to realize maximum profits based on a given
amount produced. However, in the fruit industry, each year
develops a maximum amount produced. If this entire produc-
tion can be sold with no danger of carryover in the following year,
or a minimum danger of carryover in the following year, then
optimum returns will be more assured to growers since each

136

past year's experience is the most important factor in the recep-

tion of his commodity in the trade. Furthermore, his commodity

is priced to receive optimum profits from optimum sales at the

national level into all outlets over a twelve month period (54).

Of course. the above remarks are of primary relevance to the
cherry industry, but it presents an example of the homeostasis set up
by a desired distribution pattern. In the light of the above, it may be
reasonably assumed that the speaker:

1. Considers the marketing problem to be one of distributing a
maximum quantity over a twelve month period.

2. Considers it undesirable to have a carryover from year to
year and maximizes total revenue within this constraint.

3. Rejects negotiation as a procedure for establishing the price.

4. Rejects supply control as a profit maximizing device.

5. Asserts that "optimum" returns are maximum returns consis—
tent with the "no carryover" pattern.

6. Sees the allocative function of price as being implemented
through the de facto distribution of revenues from each year's sale of
the crop.

Using the definitions of this dissertation this is a bargaining

situation, but negotiation is not executed as a feasible plan except

 

(54) B. I. Freeman, op. cit.

137

where the individual processor attempted to elicit a counteroffer from
the association.

The locus for price determination may be represented by a con-
ventional supply curve indicating a fixed quantity (vertical) and the
demand represented by the point on that supply curve that indicates the
total revenue (average revenue x quantity). These supply and demand
representations are estimates. The quantity is estimated in advance
of the harvest season, and the price is selected that is considered the
most likely to lead to the zero carryover goal. With the assertion that
the previous year's experience is the most important factor in deter-
mining the "reception" of the commodity, it is seen that the distribu-
tion pattern is controlling. The appearance of carryover leads to im-
mediate reaction. This reaction can and does lead to demand creation
activities by the selling association, hence the ex post revenues are in
part a function of the errors of estimates in quantity. Conceptually,
the bargaining association is seen to execute the plan to bargain with
a person that is a composite of buyers, but in the event of the appear-
ance of undesirable stocks, resorts to negotiation with individual sellers
to attempt to reach the desired pattern. Price leadership is an accurate
description of the use of the association power to deny the access of
buyers to independent alternative sellers. It has been seen that the

association itself can function as an independent alternative buyer in

138

competition with the processor. The only feature of the bargaining
model that is not present in the cherry industry is negotiation of the
original pre-harvest price.

It must be remembered, however, that demand, in the dynamic
sense, is the aggregation of plans to buy based on price expectations
for a product to be sold at some future time. The problem facing the
group that is attempting to estimate a price that will achieve a desired
distribution pattern is that of estimating plans. The tactic of acting
as a competitive buyer (e. g. , processing its own product) puts compe-
titive pressure on the other buyers who seek to maintain market shares
or meet some other sales criteria. The involvement of values in the
plans of the buyers means that there is some pressure on the goals of
the buying firms. This particular point was the subject of some strong

discussion appearing in the American Fruit Grower, April, 1961. The

 

writer charged that the root of the price difficulties in the California
Peach Industry was that the "old line" packing executives did not want
to bargain over price. Each preferred to set the price at his plant at

a level that could be "easily" sold. The grower accusation was that

the failure to move the crop was due to canner "laziness" and arbitrary
price setting (55). The merits of these particular arguments are not

pertinent here. The important point to be rec0gnized is that demand

 

(55) William J. Monahan, "Harvest of Perpetual Crisis," Amer-
ican Fruit Grower, April, 1961.

 

139

involves plans and plans involve values. The estimation of the other
person's plans in the selection of the price offer involves forming an
estimate of the limits to which his value system can be shifted in a
favorable direction. It is hypothesized that, given the quantity sup-
plied, there is a variation in average revenue that is a function of the
activities of the suppliers, not in the form of direct promotion but by
their assuming the role of competitor. This proceeds directly from
the execution of the shared plan to furnish the necessary independent
offer to limit the bargaining power of the other person in the market.
To illustrate, given a crop, say apples, it is possible for the suppliers
of apples to affect the total revenues derived from the sale of the crop.
This is achieved by execution of the shared plan to promote apples

and of the reaction by apple buying firms to a shared plan executed by
a group of apple producers to function as a competing processor,
dealer, or broker.

With regard to the semantics of economic terminology, it can
be noted that the seller often feels that he is engaging in a price "dis-
covery" process. Businessmen are quick to talk about the "iron law
of supply and demand. ” The economist talks about the stable equili-
brium, under certain assumptions, that is characteristic of equality
of supply and demand. It is suggested that both are talking about the

reaction to the appearance of stocks (including flows at given rates

140

over a given period of time) in certain undesirable categories. A point
of difference can arise when persons differ on the specification of the
categories that make up the supply and demand schedules, and on the
value judgment of just which categories are undesirable.

Another statement of purpose and point of homeostasis appears
in the following statements of Robert E. Braden, Field Service Direc—
tor, Michigan Agricultural Cooperative Marketing Association:

To avoid or ease the present price-cost squeeze, farmers
and growers must work together to organize their marketing
power. By uniting in a single voice, we can obtain, at the mar-
ket place, the prices that reflect the full market value of our
products.

Its (MACMA) primary purpose, of course, is to act as
sales representative for its members in negotiating terms of
trade for the sales of their products (56).

Then, perusal of the leaflets that are being used to inform
potential members of the organization's goals in each of the commodity
divisions indicates the following objectives:

1. Reduction of price fluctuation.

2. Work for "full market value" and "best price for everyone

concerned" (57, 58).

 

(56) Robert E. Braden, op. cit.

(57) "Marketing Opportunities for Michigan Aspargus, " Michigan
Agricultural Cooperative Marketing Association, 1961.

(58) "Marketing Opportunities for Michigan Processing Apples, "
Michigan Agricultural Cooperative Marketing Association, 1961.

141

In conjunction with the above statements it is important to note
two statements from the 1962 policy statement of the Michigan Farm
Bureau, the parent organization to MACMA:

We recommend that marketing orders and agreements be
prohibited from establishing programs that would involve:

1. Production controls
2. Market quotas
3. Price fixing (59).

The method used by M. A. C. M. A. involves an orderly
and well informed approach to the negotiation process. We do
not approve of the use of strikes or forced withholding prac-
tices as the bargaining procedures for a farm organization (60).
Before commenting on the above statements it should be noted

in passing that the above statements are directed at the value systems
of the potential member and apparently for the purpose of establishing
the MACMA value system. This is in agreement with the hypothesis
that this is characteristic of newly formed organizations. As yet
MACMA has not gained recognition as a bargaining agent for any pro—
ducer group although it has been reported that the existence of a move
to organize has had some impact on prices (61).

Looking at these statements by MACMA and its parent organi-

zation, the Michigan Farm Bureau, it is seen that if the hypothesis is

 

(59) 1962 Policies, Michigan Farm Bureau, adopted November
1961, East Lansing, Michigan, p. 19.

(60) Ibid., p. 35.

 

(61) From conversation with Dr. David Call, Department of
Agricultural Economics, Michigan State University, January, 1962.

142

correct that the convergence to agreement is contingent on perceived
costs to non-agreement, imposition of these costs on any dealer or
processor can only be achieved in a limited way. Since supply control
by collective withholding or under federal order is not advocated, the
remaining alternatives are to seek out all possible alternative buyers,
or, execute a shared plan to buy and process. This means that the
Association is proposing to act primarily as an information agency
unless it is willing to assume the burden of fostering the farmer coop-
erative ownership of strategic blocks of its own commodity in as yet
undetermined quantity. This latter contingency was accepted by the
Great Lakes Cherry Producers when it moved rejected cherry tonnage
and processed the output of Western New York State. The assertion
is simply that once the organization embarks on its chosen course it
will be faced with the necessity to withhold or assume ownership of
large blocks of commodity.

The intent is not to criticize the people who forge such policy
and policy statements. The assertion is that the use of superior
information alone and cooperative bargaining without the "or else"
necessary to impose costs to non—agreement cannot lead to significant
gains. The conflict of interest centers on the value judgments about
just what categories of distribution are desirable. It is possible to
stabilize prices at low levels by moving large quantities into low value

categories.

143

The relationship of the foregoing discussion to the bargaining
model is that it demonstrates again that, within the constraints of not
imposing supply control, the point of homeostasis for the organization
is an optimal distribution pattern for a given supply of a commodity.

This question of the value conflicts involved in the definition
of demand categories became apparent at a recent seminar exploring
the problems of developing data for efforts to organize the producers
who sell processing apples. The initial question, "What is a process-
ing apple ?" dominated the discussion. It became apparent during the
course of the discussion that too little is known about which apples go
where under varying supply conditions.

There is the considerable question about who should develop
and supply such rather detailed data. It can be suggested that if the
basis for survival of the cooperative is the possession of superior
information, the information had better be developed within the
cooperative.

The counter-argument can be advanced that if this information
is developed by a public agency, such as a land-grant college, and
made available to both the Association and the processors, this
would shorten negotiations and reduce the likelihood of economic
conflict which is presumed to be to the detriment of the general public.

There is this justification for the participation of the public research

144

organization in the development of such information, but there is still
the problem of the conflict over optimal distribution categories. The
researcher who attempts to define the demand relation must cope with
the problem of just how hard the sales organizations of the processors
should work. The specification of "full market value" as associated
with average revenues that lead to a desirable growth rate, still
leaves the problem of selecting the growth rate.

Perusal of the published materials of the Michigan Milk Pro-
ducers Association indicates that it considers its purpose, aside from
the auxiliary services rendered, to bargain for better prices than can
be obtained without cooperative effort. The Association indicates that
the procedures that are worked out for withholding and diversion to
its own and other cooperative facilities are means to that end. The
price demands that are made tend to be viewed as changes from the
prior contract.

It must be noted in the case of the negotiated premium for milk
that only the premium on Class I sales is negotiated and that gains
here can be cancelled out by increases in total milk that lower the
blend price through larger proportions going into Class 11 use. The
Federal order that provides the base for the negotiated premium also
includes a supply-demand adjustment factor.

The officer of MMPA expressed the opinion that the producers

145

in his organization considered association-imposed supply controls,
that is, the shared plan to limit MMPA supplies, to be unworkable in

the face of interregional competition.

SUMMARY

It was the purpose of this chapter to develop referents for the
words in the formal model by considering the written and spoken
statements of people and organizations which are engaged in cooper-
ative marketing efforts. It has been noted that:

1. Minimal offers are associated with ultimatums in the bar-
gaining process. These ultimatums reflect the constraints that the
model postulates, the alternative to negotiation with this particular
opponent in the market. The harsh lines of these alternatives asso-
ciated with breaks in negotiation or the abandonment of production or
purchasing activities are modified by the longer run aspects of con-
tinued association and the potential cost of public reaction to econo-
mic conflict.

2. It is seen that under a system where the producer association
is negotiating price and the buyer is indicating quantity, the point of
central tendency or homeostasis that directs the price demands of the
cooperative is some optimal pattern of distribution of an estimated

quantity supplied during a particular future time period. This point

146

may be interpreted as that point on a vertical supply function (assum-
ing the conventional price-quantity coordinates) which maximizes
total revenue, given the level of demand creation activity associated

with the estimated future quantity supplied.

CHAPTER VI

SUMMARY OF MAJOR STATEMENTS

The primary purpose of this dissertation is to develop a simula-
tion model of the bargaining process. This purpose of simulation is
achieved if the referents to the substantives in the model, when
inserted into the model, yield a descriptive output that is indistinguish-
able from the input data. Implementation of this format requires con—
struction of the model, identification of the referents for the substan-
tives in the model, and the submission of the descriptive output for
tests of simulation after application to specific case material.

It is the procedure of this dissertation to build the model on the
basis of a cybernetic hypothesis about human behavior. This hypo-
thesis is advanced in the form of the TOTE unit of behavior originally

proposed by Miller, Galanter, and Pribram, in Plans and the Structure

 

of Behavior. This TOTE unit is extended for the purpose of describing

 

the processes of exchange, bargaining, and negotiations.

It is a property of the TOTE hypothesis that it leads to a hier -
archical model of human behavior that is equally applicable to the in-
terpretation of both individual and group behavior.

The principal behavioral form that is derived from the TOTE

hierarchy is the plan, which is itself a hierarchical process that

147

148

controls the order in which a sequence of operations is to be performed.
The TOTE hierarchy as proposed by Miller M. is extended by pos-
tulating not only the control process on sequence (MAP), but by a
plan-controlled process for the selection of plans (PSP), and a plan-
controlled process for learning or information processing (LP).

It is suggested that the plans selection process is of the Edwards
non-additive subjective expected utility maximization form. This is
not a necessary form to the model since no explicit assumptions are
made concerning the structure of the preference system of the indi-
vidual except those summarized below concerning the feasibility of
plans.

The selection of plans is postulated to be a process in which a
single plan is selected from a finite set of known plans on the basis of
a property of plans called feasibility. Feasibility is not observable
and is assumed to be the product of the subjective expected probability
of plans execution at the time of plans selection times the expected
utility (incongruity reduction) of the successful execution of theplan.

Since the factors yielding feasibility values are not observable
and it is not desired to imply that cardinal measures exist, only three
values are considered. First, it is assumed that any plan that is
selected for execution is the most feasible and that plans selection

precedes action. It follows that all actions are assumed to be rational.

149

It is assumed that there is an extreme value of feasibility such that
expected utility is high but the expected probability of successful
execution approaches zero. It is also assumed that there is another
value extreme at which the expected probability of execution of the
plan is l. but the expected utility of successful execution approaches
zero.

In application of the model to the exchange of property it is
assumed that price is a ratio of exchange in which the numerator is
money. It is asserted further that regardless of the form of the
underlying preference function of the individual or group, the making
of offers, which is necessary to exchange, requires the expression
of preferences on an equal interval cardinal scale of value, e. g. ,
money values. It follows that for values of feasibility for plans to
exchange where the probability of execution is 1. , if the preference
for money is ordered, the money value of offers reflects the feasi-
bility of the plan to make that offer.

The overt price offer in the market is interpreted under the
plans hierarchy to be the result of the plan to make that offer. The
plan to make the offer is a sub-plan to the plan to bargain. Bargaining
is defined as plan-controlled behavior for the purpose of establishing
agreement on the terms for trade. Negotiation is defined as offer-

making for the purpose of eliciting at least one counteroffer from the

150

other person in the market. The plan to negotiate is a sub-plan to the
plan to bargain. Since price agreement is stated as a necessary con-
dition for exchange of property, the plan to bargain is in sub-plan
relationship to the plan to exchange property. This is the form of the
hierarchy of exchange behavior.

The three points of feasibility with respect to offers are repre-
sented by the overt price offer (maximum feasibility) and the prices
which bound the range of possible price agreement (zero probability
of acceptance, or, zero value to acceptance, by the other person).
The prices at these bounds are such that, at any price offer of less
value to the offerer, it is more feasible to not agree with this particu-
lar other person. That is, it is more feasible to abandon negotiation.

These three prices and the mutual estimates of the other person's
bounds are assigned symbols and the process of negotiation between
two persons is described. The description defines the limits to the
range of price agreement, the pressure toward some single price for
mutual agreement, and points of homeostasis in the environment that
bear on the stability of the single agreeable price.

It is demonstrated that the limits to the range of agreement are
offered by the presence of at least one nearly equally feasible alter-
native to negotiation at the prices which bound the range of agreement,

and, the mutual estimates of the prices equivalent to these alternatives

151

for the other person. The pressures yielding the convergence of overt
offers toward agreement are hypothesized to arise from present esti-
mates of the future costs to non-agreement as imposed by both the
action of the other person and the subjective disutility for activity
associated with negotiation and economic conflict. Points of homeo-
stasis that are cited are optimal distribution patterns for fixed quan-
tities of property (such as a "crop") and the criteria used by firms in
evaluating prOgress toward goal achievement (such as the profits
entry in its accounting system).

The interpretation of exchange, bargaining, and negotiation is
then expanded to the situation where the seller is a group of agricul-
tural producers who have selected, as a most feasible course of
action, participation in a shared plan to establish the terms for trade
for their joint product.

The establishment of the bargaining association is asserted to
be analogous to the formation of a TOTE "exchange, " applicable to
the group as a whole. Each of the three elemental processes of the
TOTE hierarchy (MAP, PSP, and LP) are identified in the group
activities. It is asserted that the offers made by the group can be
interpreted as conforming to the same constraints, pressures toward
agreement, and homeostatic reaction that characterize individual

offer -making.

152

The concept of shared plans is expanded to the interpretation
of the behavior of governmental groups and processes. It is postu-
lated that the rules determining the nature of the legal environment
for negotiation and economic conflict are the result of the execution
of the shared plan yielding the activities of government. In this group
context the PSP is interpreted as a political process executed under
some rule such as assent or choice of plans by majority vote. The
LP in group context is discussed in terms of intra-group, inter-group,
and inter-individual information flows. It follows from these state-
ments that price agreement stands at the conjunction of individual
plans and shared plans to establish price agreement under the rules
set out by the shared plan to govern.

The objective of establishing a simulative model requires that
the substantives in the model be replaced by their referents from
the real world. To implement this the internal and external messages
of bargaining associations and the statements of leading cooperative
executives and operating personnel were examined for these referents.
Such referents were found in various forms depending on the com-
modity and the unique characteristics of the association.

The ultimate test of simulation is not attempted. This would
involve taking an individual case, inserting the referents unique to

this case into the model, and submitting the output of the model to

153

tests for simulation. One rule for use in such judgment would be
that simulation is achieved if the descriptive output of the model is
indistinguishable from the input data for at least one judge.

The generation of hypotheses from a simulation model requires
that the formal structure be treated as a deductive system. The
assertions that are aimed at simulation become assumptions. The
general criterion for validity of the hypothesis is that it does not alter
the model when it is supplied with the referents for its substantive
terms. As an example of the difficulties encountered, it was as-
serted in the model of this dissertation that the pressure toward
agreement from divergent initial overt offers arises from present
estimates of the future costs of non-agreement imposed by both the
other person and the disutility of negotiation.

This does not yield a testable hypothesis at the primary level
since any convergence or lack of it could be explained by assuming
the presence or absence of unobservable or unidentified costs or
disutility. The possible approach to empirical testing of this asser-
tion in the model is to establish the referents in a particular case
which seems to contradict the assertion, e. g. , a lengthy negotiation
session where high costs seem apparent. Once the referents (such
as the alternatives to negotiation, the mutual estimates of these

alternatives for the other person, and the estimates of costs such as

154

are apparent) are established, they can be inserted in the model and
a test for simulation applied. The failure to establish simulation under

the specified tests is evidence to discredit the model.

PUBLIC POLICY

The preceding remarks lead to the statement that the key to
validation of simulation models lies in the establishment of referents
for its substantive terms. This is the reason for the considerable
emphasis on the semantics of the terminology of the model and the
terminology of economic literature. A form of hypothesizing will
follow, therefore, that seeks to combine the syntax of the bargaining
model and the lexicon of statements made in relation to public policy
and some of the moral issues surrounding cooperative or collective
bargaining.

As a point of orientation, the discussion of this section will
center around some quotations of persuasive intent directed to the
moral issues surrounding negotiated pricing in the agricultural sector
of the economy. First:

2. Our company believes that we are a marketing outlet
for our growers and we are in partnership in producing fruits
and vegetables, and it has always been our basic policy not to
interfere with any grower's freedom in joining an association
or any organization. We, however, do feel that we owe it to
growers when we have mutually had satisfactory dealings to

call to their attention some of the points that these contracts
(membership agreements and market contracts with bargaining

155

associations) hold and some of the overall experiences that our
growers have had in other areas with like associations.

Q 0 O O O O O O O O O C O O O O O O O O O O O O O O O O O O 0

e. The association can tell you to whom or where you
may sell your raw products. You would be losing your
decision of choice and would be turning over to an outsider
all of your rights to make your own decisions. It has E
worked out this way in other states. Some of your present
decisions you would be relinquishing to the association to
make for you are: price, although you may decide that it
is profitable for your farm -- and services that you cus-
tomarily know are now being furnished could be eliminated
without your knowledge, etc. " (62).

 

Secondly,

The apple grower, marketing his processing apples as an
individual, does little to influence and stabilize prices. His
volume is insignificant. He is not fully informed on the current
market situation. He does not know what growers in other areas
are doing. He is susceptible to misleading rumors, and in years
of above average production he must actually seek a market on a
"what will you give me" basis.

A strong Cooperative Marketing Organization (MACMA)
acting as sales representative for its members is necessary to
make growers effective in obtaining better prices and other terms
in the sale of their apples.

It (MACMA) is a statewide farmer-owned and controlled
cooperative. It is a voluntary, non-profit organization, legally
operating under Michigan Law as a bargaining and marketing
cooperative.

Division operations are directed by a fifteen member Pro-
cessing Apple Marketing Committee. This committee is elected
by the grower members for two year staggered terms, on a
District basis. The MACMA Board of Directors delegates

 

(62) In a letter to pickling cucumber growers. H. J. Heinz and
Co. , April 11, 1961.

156

responsibility for Processing Apple Marketing activities to this
committee of growers (63).

Thirdly,

May I speak to you in a rather philosophical vein for a
few moments. To those of you who are concerned that this
(justifying the cooperative marketing of processing apples -—
via MACMA) may be viewed as an organization of an ultra-
liberal nature, let me point out that the very opposite is true.
We look upon this organization as being of growers, by
growers, and for growers. We do not think it is necessary
for a labor union, a "left wing" organization or the govern—
ment to tell us how to run our business. But they will if we
don't run our own.

. . . You and I are the ones who should control our
destinies. It is ridiculous to permit someone else to do so.
With our combined intelligence, resources, and determina-
tion, great strides can be taken (64).

The first of the quotations is from a company letter with the
intent of discouraging the formation of a pickling cucumbers bar-
gaining cooperative. The second is from a brochure encouraging the
formation of a processing apple bargaining association. The third is
from a statement by the chairman of a marketing committee advanc-
ing the arguments for the attempt to gain recognition for a processing
apple bargaining association in 1962.

In all three cases, there is reference to the matter of control

on the individual's own decision about to whom to sell, and at what

 

(63) "Marketing Opportunities for Michigan Processing Apples, "
MACMA, op. cit.

(64) Henry Nelson, "Will We Bargain in 1962 -- ?" Mimeo, Pro-
cessing Apple Division, Michigan Agricultural Cooperative Marketing
Association, 1961.

157

terms. The packer in this case tells the grower that he will lose his
freedom to "outsiders. " The organizing farm organization tells the
grower that the control is in the hands of his own elected representa-
tives. The chairman of the marketing committee asserts that if the
farmer doesn't make his own decisions as a group someone else will.

It would be a modest accomplishment if the preceding model for
interpreting the process of price negotiation could at least yield a
framework for talking about individual "freedom, " or the relationship
between group controls and the constraints on the individual, in a
somewhat dispassionate manner. Unfortunately "meaning" can be
described more as an internal state of people than a unique property
of words, and assessing the intended meaning of a word like "freedom"
is particularly dependent on the user.

It was suggested in Chapter II in the discussion of the flexibility
of plans, that the subjective feeling of freedom might be associated
with this property of plans. It has been suggested that flexibility
could be measured by looking at the number and feasibility of plans
open to the individual at any point in time. Relating freedom to num-
bers of alternatives, the signing of a binding agreement transferring
the authority to sell one's product may drastically curtail the number
of potential offerers that one may face as sellers. On the other hand,

the cooperative formation of the bargaining association is the means

158

for implementing one more independent offer. In a market such that
the seller of an agricultural product faces the same offer of price
made by several offerers, the signing of an association contract

may reduce the buyer to one, the association, but pose an alternative
offer to the single price in the competitive market. With respect to
"freedom" one can say that there is a loss of freedom as measured

in numbers of alternative offerers but an increase of freedom as
measured in numbers of alternative independent offers. How is one

to compare them? Similarly, in the implementation of a price support
by CCC purchases in return for acreage controls, one sacrifices the
number of alternative cropping systems to gain in the number of
alternative offers in the market. How is one to say which is the
greater freedom? One can go on to talk about the freedom that accrues
to the individual as increased income enables implementation of more
elaborate and extensive plans. By the same token it can impose
restriction along another dimension if the income increase carries
with it expectations of role behavior. A central government can imple-
ment a retraining program for persons trapped in resource depletion
areas, or set up "homesteads in reverse" and in a very real way in-
crease the freedom of choice of persons trapped in unemployment. On
the other hand the "free" market can deny profits to a firm that would

permit desired expansion from internal sources of funds. In short,

 

159

one way to talk about freedom is to view from the standpoint of the
individual and start examining the number of alternatives open to him
above some minimal level of desirable consequences.

Another way to talk about freedom is the flexibility of the time
intervals in the MAP. When farmers talk about the "freedom" that
they enjoy, they aren't talking about the flexibility of their production

plans. Far from it. The urban employee can often call it quits at

 

the end of the shift while the farmer is pinned to nursing a bunch of t
newly born pigs through a cold night. The "freedom" that is the
referent here is the absence of the rigid regime imposed by the
uniform chronological time units used to time urban employment in
many plants. It is essential in urban employment, because mass
production and integrated communications nets require that people
occupy certain places at certain times for specific functions. The
farmer with little or no work force is not bound by the integration of
shared plans that characterize industrial firms. A further implica-
tion along this line is that as a population density increases, more
of what the individual does becomes of public concern and the more
the individual becomes involved in the integration of his activity with
those of others, if it is no more than ducking faster in thicker traffic.
To return to the matter of executing the shared plan to bargain,

one group can impose constraints on the alternatives open to another

160

by expanding its own list of alternatives. The resolution of such con-
flicting changes in the flexibility of action are a matter of equity to be
settled under the legal system in which the conflict takes place. They
are not subject to some over-riding definition of freedom. If there is
an over—riding notion of freedom, it is in the access of the individual

via the political process to execution of a shared plan to control the

rules system.

BARGAINING POWER

Bargaining power has been defined above in terms that measure
it as a ratio of the bargainable funds obtained to the total of the bargain-
able funds (represented by the price difference between minimal offers
times the quantity negotiated). This is no more than a measure of
relative bargaining strength. There are two other interpretations
that simulate the usage of the concept of bargaining power in the real
world. The first would be the money difference between the negotiated
price and the minimal offer of the opponent. Another interpretation
would be the money or quantity of funds between the negotiated price
and the minimal offer based on the least acceptable price to the other
person with the expectation that he will conform to some pattern of
production or consumption. This last meaning is asserted to be that
intended for the phrase, "bargaining power, " in Henry Wallace's

statement above (supra, p. 2) and "marketing power, " in Mr. Braden's

161

statement (12151. ). In this dissertation, the referent for "bargaining
power" is the degree to which a person can secure agreement at the
maximum terms dictated by the minimal price acceptable to the other
person. Further, the time horizon will be specified by the person
trying to exercise the bargaining power. As an example, the com-
pletely powerful buyer could secure agreement at that price at which
further production would be carried on for x number of years as
estimated by the buyer. To achieve this power it may be necessary
to eliminate the alternative presented by competing buyers. This
exercise of power in restraint of trade is the subject of the balance

of power struck by the court decisions which interpret the anti—trust
legislation and the exemptions thereto. These decisions interpret
legislation which is the result of the group plan to determine the rules
for economic conflict. Interpreted in this way it is seen that negotiated
prices are determined by both the aggregation of preferences within
the individual or within the group that is the person in negotiations.

It is also seen that the negotiated price is determined in a context that
is also the aggregation of preferences in determining the rules for
negotiation. This places the process of price formation at one of the
points where the subject matter of the study of economic institutions
can complement the subject matter of a study of individual and group
economic behavior. In the concept of the plan, these two branches of

the economic science blend into a continuum.

162

This exercise in the semantics of the phrase, "bargaining
power, " makes it rather clear that when one uses the concept as it
is defined in Chapter III, the assumption is that the point in time is
given, hence it is a snapshot concept. In the point by point shifts
of minimal acceptable prices, estimates of them, and the changes on
overt offers, the broader meanings of "bargaining power" are

represented.

CHAPTER VII

MODELS

In the preface to this dissertation it is asserted that the value
of the model that has been developed in the preceeding pages is con-
tingent on its use as a deductive system. This is true in the sense
that the intended use is prediction and control. A brief digression
on the term model, however, will serve to demonstrate the problem
that is faced when a model or theory, which has been derived by
structuring empirical data, must be withdrawn from its context and
used for this prediction and control.

A model is assumed here to be a (descriptive generalization.
It assumes that the substantives in the statement have referents and
that the logic is internally consistent. In short, the assumption is
that the model describes, in an orderly and simplified way, some
overt real world phenomenon. There are at least three ways in which
models are used and each has its counterpart in the kind of research
that is associated with a given model.

First, and often not recognized, is the basic assertion that
speech and description presume a model, albeit esoteric, held by
the speaker. As an example, a speaker may refer to an object which
he calls a desk. Say it is a wooden desk. The word desk implies

that it is being classified according to the usefulness of its form.

163

164

It is used to contain objects and support other objects. It may be
assumed that under normal circumstances that the speaker would use
the desk in just this fashion. Suppose, however, that another speaker
has had no experience with the support of objects found in and on
desks in a modern civilization and sees its usefulness to lie in its
materials. One can quite well imagine that the translation of such
speech would indicate that the word used referred to the general class
ofobjects or a sub-class that is used for fuel. Nor should one be very
surprised if this second speaker became cold, he would chop up the
desk (fuel) and burn it to keep warm. Here the person classifies
the desk in terms of its composition instead of its form. This would
be a trite point if it were not for the often observed annoyance dis-
played by scientists when one of their colleagues seeks to impose an
esoteric vocabulary on his associates. Someone may assert that he
has no "right" to do this. This could only be correct in the sense
that he may not be permitted to continue to communicate in terms of
this vocabulary and continue in the status of an accepted researcher.
This places the forger of new theories or models in a difficult posi-
tion. He can use new terms for new concepts and demand that his
audience learn the new terms, or he can use old words for new con-
cepts by re-definition and risk being misunderstood.

The relevance of this to the discussion is that since models are

used as structures for classifying for purposes of communication, then

165

one kind of hypothesis associated with a given model would assert that
this model is "better" on some scale of value for the purpose of com-
munication. It is suggested that such a scale has something to do
with increased generality without sacrificing the precision of defining
the referents. In other words, the model should be capable of
describing more events without becoming increasingly vague about
what events are being talked about. The exact counterpart of this
hypothesis in this dissertation would assert that the cybernetic hypo-
thesis and the model of bargaining that has been derived from it is a
more useful framework for researchers in communicating with each
other about market phenomena. It is also asserted that the proof of
this lies almost of necessity in the course of ex post acceptance of the
vocabulary. This is inextricably bound up with the other two uses
made of models.

The second use or form of models is that which emerges as
a static theory. The statement is of the form; if such and such
conditions obtain, then a given state of affairs will also be found to
exist. One may extend this through time by the useful fiction of the
steady or stationary state. This is the basic form of static economic
models. The process of change is not a part of such models. It
must be kept in mind that the substantives in the statements of both

the explanans and explanandum presume the models for communicative

166

purposes. To assume otherwise leads to breakdowns in communica-
tions, or, to put it another way, the models will only exist in the mind
of the model builder.

The third use of models is the one which will occupy the balance
of the chapter. This use results in theory of the form; if such and
such conditions exist paw, then, a given event or certain events will
follow. This is the form of the dynamic model. The counterpart in
research is the investigation of sequences, but once again attention
must be given to the matter of semantics.

In the course of discussion, several hypotheses have been
advanced concerning the conditions for agreement or non-agreement
to terms of exchange, and the relationship between mutual knowledge
of the alternatives open to opponents in the market and the length of
negotiations. Also, some mention has been made of the difficulties
that the researcher might encounter in distinguishing bona fide offers
from those made for purposes other than reaching price agreement.

The function of this final chapter is to draw these observations
together into a statement suggesting the kind of research that might
accompany the use of the foregoing model of price formation for pur-
poses of explanation and prediction.

One form of testing that is basically inductive in nature has been

discussed. This is the examination of the hypothesis that the cybernetic

 

167

model is of sufficient generality in the interpretation of human econo-
mic behavior that it can be used for general description of varying
specific bargaining situations. In this type of investigation the syn—
tactic (sign to sign) relationship of the substantive terms of the model
is assumed to be of the TOTE hierarchy form and the tests for
simulation are applied as the model is used to structure empirical
data descriptive of varying bargaining situations. In this form of
research the objective is simulation and the emphasis is on the
semantics of the substantive terms of the model. The model must
retain logical consistency to be valid, but the generality of the
system can be preserved by relaxing the criteria for the specific
identification of the referents to the substantive terms. To put this
in more simple language, the researcher can be specific about the
statement of causal relationships but vary the vagueness of just what
he is asserting causes what. The explanatory power of the model
then increases as the referents for the terms of the model become
increasingly well defined.

The step from the inductive simulation model to the deductive
system, that is a theory, requires the additional assumption that not
only is the syntatic relationship assumed but also the semantics of
the if—then statement. Given these assumptions one may proceed to
statements of the form; given that a set conditions obtain, then

certain specific events will follow.

 

168

The step beyond this is not only to assume that the substantives
in the theory refer to specific events but to define them, that is to
issue specific instructions for identification of the real world refer-
ents. In other words, this means to describe how one should go about
testing specific hypotheses deduced from the model in specific situa-
tions. The balance of this chapter will be directed toward suggesting

the procedures for implementing this last step.

SUGGESTIONS FOR SPECIFIC RESEARCH

To facilitate discussion, a concrete example will be used.
Suppose that a group of farmers who produce pickling cucumbers, in
conjunction with a farm organization, approach an economist. They
ask him to estimate the chances for success in the formation of an
association to bargain with cucumber processors over the terms for
the sale of the unprocessed cucumbers to the processor. More
likely, the question would be of the form, "We want a higher price
for our cucumbers. We think that a bargaining cooperative will
enable us to get higher prices. How do we go about forming a suc-
cessful cooperative ?" The question of feasibility could just as easily
be raised by the economist. The specific problem is how does one
go about determining whether or not the conditions for successful

coope rative bargaining exist.

169

Turning to the theory, it is seen that, assuming the TOTE hypo-
thesis to be valid, the association would be formed as a result of the
decision of individuals to execute the shared plan to seek price agree-
ment. This action would have to be based on the individual perception
that this is the most feasible course of individual action. It follows
that if B0 = 80’ then bargaining would be precluded and the motivation
for the formation of such an association to reach price agreement
would be non-existent. However, B0 and SO are not observable, they
must be inferred by each side from experiential or overt data in the
market environment. It may be further derived from the model, now
as a deductive system, that bargaining will be precluded if CO = D0'
or CO' = DO', or, A0 = E0. Furthermore, if C, > D,, any agreement

1 1

other than at Di (the purpose for formation of the association) would
imply the ability of the cooperative to impose costs of non-agreement
on the buyer, or arise from tapping, by sellers, of a self-imposed
disutility for negotiation per se of the buyer. At the same time the
association of sellers must be able to minimize the net effect of the
costs to non-agreement that can be imposed by the buyers plus the
sellers' own disutility for negotiation per se. The statements of the
theory have been assumed to be valid. The crucial point is the iden-

tification in the market for pickling cucumbers of the referents for the

substantive terms, C,, D,, A,, E,, C,', and D,'.
1 1 1 1 1 1

170

In the formal model it is assumed that price is the sole variable
and that the other aspects of the terms of trade may be reduced to
price equivalence. This assumption is retained. The term C1 is
then that price above which the buyer will seek alternatives to price
agreement with a particular seller. In the market for pickling cucum-

bers this may refer to one of two prices, either the price below which

 

the buyer (assumed here to be a processor) will turn to alternative

 

supplies or will discontinue the processing. This means that Ci will

be the lower of two prices. One of these prices is the price of supplies
that are potentially competitive, over a given time period, to those of
an estimated association membership. The other price is that above
which the processing firm cannot be expected to remain in the processing
business after a given length of time. Note that in each case the length
of time must be indicated. It is suggested that in assessing what might
be called the "break even point" for the buyers, the cost analysis would
be more effective than the usual studies if it is approached as suggested
in a preceeding chapter. The specific recommendation is to examine
each purchasing firm (processor) and estimate cost on the basis of a
given length of time and the sequence in which the inputs to the firm
would be withdrawn in the event of non-payment. This procedure brings
to bear such factors as the age of entrepreneurs, the status of the

existing capital equipment, and the rate of replacement. If the

171

cooperative makes demands such that managerial or capital inputs are
withdrawn from the buying firms over a long period of time, the initial
planning should at least take cognizance of this potential consequence.
A specific case study is implied.

The relevance of the length of the time period to the price of
alternative supplies lies in estimates of the long run supply response
of the alternative supplies. If such response is highly inelastic, the
sellers could overestimate the importance of such supplies. If such
response is elastic, it could lead to permanent establishment of alter-
native supplies and perhaps the eventual migration of processing
facilities out of the community. As an example of the kind of infor-
mation that may emerge, the competitive supply of pickling cucumbers
to Michigan growers may be Southern growers utilizing surplus family
labor. The withdrawal of payments from producers may lead to
immediate withdrawal of Bracero labor from Michigan leaving the
Southern growers in the market. On the other hand, increased pay-
ments may elicit a sharp increase in production in Michigan since the
use of Bracero labor can be expanded much more sharply than family
labor. It is seen therefore, that the definition of Ci in the specific
case of pickling cucumbers involves analysis of the costs of produc-
tion in competitive areas of supply and in the processing facilities.

A key factor is the price below which Bracero labor would be withdrawn

172

for lack of revenues to pay them under federal regulations.

The term Di is formally defined as that price below which the
seller will pursue some alternative to seeking price agreement with
a particular buyer. Once again there are two apparent courses of
action. One is to seek an alternative buyer; the other is to cease
production. The identification of the real world referent for the
substantive term Di would require estimates of the alternative
buyers and the prices that would be offered to remove given quan-
tities of pickling cucumbers from the market. It would also require
an estimate of the supply response to various price levels among the
community of producers as a whole, and in particular, that group of
buyers that may be expected to comprise group membership.

This latter estimate presents a sticky but crucial problem.
It is characteristic of organizations that a good deal of the final suc-
cess in reaching group objectives is contingent on the initial estimates
by a community of potential members as to the chances of success. It
is suggested that this aspect be investigated along with the estimate of
the disutility of bargaining per se by means of the Semantic Differential
Test that is outlined by Osgood 5E. (65). The test object would be a
designation of the proposed organization, and the test would yield a

measure of attitude toward the organization along both potency (weak-

 

(65) Osgood et al.', op. cit.

 

173

strong) and evaluative (good-bad) dimensions. Once this test is ad-
ministered among the population from which the membership is to be
drawn, these values may be weighted by the value of product normally
produced by the individual, and some estimate formed of the composite
opinion of a sufficiently large block of producers such as can impose
sanction by withdrawal of the product. One may question this pro-
cedure on the grounds that a majority vote is the usual decision pro-
cedure in a cooperative, with each member having one vote regardless
of the size or value of his individual production. This may be true

but large supplies external to the organization are an alternative to

the organization and as such impose restriction on the marketing power
of an organization.

This use of the Semantic Differential to determine potential
cohesion and economic or market power of an organization would
represent an area of investigation in itself. The measure that would
be developed in the above fashion would be meaningless unless prior
studies were conducted that established some correlation between
weighted attitudinal measures and subsequent performance by individ-
uals and by aggregates of individuals in cooperative action. There is
already a considerable body of research bearing on the relationships

between opinion and subsequent action.

174

Related to the identification of the terms Ci and Di is the
definition of the mutual estimates of these terms Ci' and Di'. Apart
from the estimates of what constitutes the potential membership of
a bargaining cooperative, the terms C1 and Di may be largely esti-
mated from factors external to the immediate interaction between
the opposing parties in the market. The definition of the mutual
estimates and the relationship of these to Ci and Di lead to interesting
hypotheses about associated behavior. First, as a matter of pro-
cedure, it is suggested that these estimates be assessed by direct
interrogation of the principals involved. That is, simply ask the
potential sellers and buyers what they consider to be the minimal
valued offers that would be acceptable to the persons that they face in
the market. It is hypothesized that if CO = DO and CC) > CO, then the
information gathering processes (LP) that accompany the organization
process will draw CO' toward CO and result in the elimination of the
motivation for the organization. To express this differently, the
information transmitted to a potential membership in the process of
setting up the organization would make it apparent that the minimum
that they as sellers would accept is the maximum beyond which the
buyer would turn to alternative suppliers or simply abandon the plan

to buy. Hence bargaining and negotiation, the assumed bases for

organization, would be precluded.

175

If it were true that CO' 2 DO', CO > DO, and CO' < CO, then the
initial motivation for the organization would have to come after a shift
in the beliefs of the potential membership induced over time and/or by
supplying new information to the membership. The promotional
activity that accompanied the attempts by organizers would tend to
create the basis for formation of the organization.

One may also describe the situation in which the presence of a
bargaining association in inactive form can preclude bargaining. In
this case CO > DO’ C6 > DO', but A0 = E0, hence B0 = SO. Verbally,
the buyer's maximal level of aspirations are limited to that offer
which is sufficient to just inhibit the choice of bargaining by the seller
as a feasible course of action. There is a margin involved that just
equals the price equivalence of the difference in per unit operating
costs of the active v. the inactive organization. In even more simple
terms, it is a strategy in the market to make sufficient a priori con-
cessions such that the opponent does not figure that organization is
worth the effort. It is a common occurrence that the threat of organi-
zation is sufficient to induce concessions from an opponent in the market.
The basic target of such maneuvers is the feasibility of plans. Per-
suasive and other tactical efforts are directed at both the present

estimates of future subjective probability of executing a plan to bargain

and at the value of such plans on the assumption that they can be

 

176

successfully carried to completion. A priori concessions are evidence
of the latter tactic; subversion of potential leadership is one example
of the former.

From the foregoing it is seen that in the period prior to actual
negotiation, the terms A0 and E0 are pertinent to the question of feasi-
bility of formation of the bargaining association. Once again the prob-
lem emerges of making an estimate of the internal feelings of an as
yet indeterminate membership. The definition of A0 and E0 requires
the estimate of the discounting applied to the value of one's own
maximal valued alternatives due to the power of the other person
faced in the market to impose future sanction. That is, present
estimates of maximal valued feasible terms are contingent on present
estimates of the future consequences of non-agreement imposed by
the other person. Closely related to this is the estimate of the further
discounting Ei - Si and Bi - Ai due to the person's own dislike for bar-
gaining (or preference for it, negative discounting).

It is reasonably apparent that two crucial areas of research
which must be conducted are alien to current economic analysis. One
of these areas is that of probing the value of the ends to be achieved

by plans; the other is the subjective estimate of success. Taken

tOgether these are the two factors that determine feasibility as defined

 

177

in the bargaining model, This means that researchers investigating

the bargaining situation will have to become sufficiently competent in
the area of attitude research so they can at least converse knowledge-
ably with those who can carry out the research on a supporting basis.
The Semantic Differential test is not the only procedure for assessing
the meaning that people attach to concepts or attitudes toward objects,

but it is one that seems to be highly appropriate to the model in this

 

dissertation. E
With respect to the more traditional areas of investigation in
the economic science, two different kinds of research are called for.
First, it is suggested that the present techniques for linear program-
ming of individual farms be extended to programming groups of
farms. It is suggested as the initial step that some specialty crop,
perhaps blueberries, where the number of farms is small and the inter-
regional competition well defined, be examined empirically and inter-
preted on a multiple farm basis. The questions here would be the
problem of inter—farm integration of total farm programs with respect
to all crops produced on the farms and also the macro effects of
individual shifts in programs.
Secondly, the variant on the usual cost studies has been suggested.
The structuring of costs on the basis of withdrawal of inputs in the

event of non-payment requires case study techniques. Objections

178

could be raised on the grounds that this departs from a rather well-
ordered and formalized science of accounting. It can also be argued
that the arbitrariness of asserting what persons may do, in general, in
any particular stage in the life cycle with respect to savings or capital
investment is no more arbitrary than the choice between LIFO or FIFO
procedures for handling depreciation.

If any generalization is to be attached to the foregoing recommen—
dations for research, it is to be found in the basic suggestion that the
attention of researchers in economics be shifted from measures of
economic activity per se to the underlying behavior that generates the
data. This does not mean subordinating data to behavioral hypotheses.
On the contrary, it means that increasing attention must be given to
alternative measures and structuring of the same phenomena, with the
further aim of rendering increased precision to the fitting of measure—

ments to the statements of the theory or hypotheses under consideration.

 

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"Marketing Opportunities for Michigan Aspargus, " Michigan Agricul-
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Michigan Milk Messenger, Michigan Milk Producers Association,
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182

1962 Policies, Michigan Farm Bureau, adopted Nov. , 1961.

 

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Anonymous. Letter to pickling cucumber growers, H. J. Heinz and
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Braden, Robert E. "The Organization of the Michigan Agricultural
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Freeman, Berkley 1. "Pricing, Raison d'Etre for Bargaining Asso-
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Nelson, Henry. "Will We Bargain in 1962—-" mimeo, Processing
Apple Division, MACMA, 1961,

Samuels, Kenneth J. "Bargaining Activities in Other Commodities, "
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