Unbalanced Bargaining Power Limits Economic Opportunity for Vulnerable Populations
The study looks at how changing the balance of power between buyers and sellers can impact long-term agreements when contract enforcement varies. By conducting experiments that adjust seller power and contract enforceability, the researchers found that the distribution of bargaining power influences relationships differently depending on the level of legal enforcement. They discovered that when enforcement is only partial, redistributing bargaining power affects agreements in a particular way, while when enforcement is fully present, a different outcome is observed. This suggests that the effectiveness of policies aiming to balance power in markets could vary depending on how well contracts are enforced.