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Negotiating Government-to-Government Food Importing Contracts: a Nash Bargaining Framework

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Document pages: 32 pages

Abstract: [Problem Definition:] Inspired by India s pulses importing challenges, we study the negotiation of government-to-government food importing contracts, with a focus on ad-hoc and forward multiple-sourcing negotiations.[Academic Practical Relevance:] We are the first to comprehensively study ad-hoc and forward multiple-sourcing negotiations for food importing. Such problems are widespread especially in developing nations, and thus the research can be relevant to the wellbeing of large underprivileged populations.[Methodology:] We develop an analytical negotiation model in the Nash-Bargaining framework, and adopt the Nash-in-Nash framework to analyze multiple-sourcing negotiations.[Results:] We find that while forward negotiations are not necessarily better than ad-hoc negotiations for the buyer, it would be true with sufficiently many suppliers. When facing a supplier pool, we show that it may be optimal to mix forward and ad-hoc suppliers, even though there is no ad-hoc transaction. In general, fewer suppliers should be assigned as ad-hoc as the pool size increases. We also find that adding a hybrid supplier (engaged in a forward negotiation with an ad-hoc negotiation as the fallback option) may be better or worse than adding a forward supplier in the presence of other suppliers.[Managerial Implications:] Our findings inform how a food importer should strategically utilize ad-hoc and forward negotiations with its suppliers to improve the outcome. The work may help countries food importing policy-making and strategies and may improve the wellbeing of large underprivileged populations.

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