COST INFORMATION AND BARGAINING POWER ON BUYER-SUPPLIER NEGOTATIONS: EXPERIMENT BASED ON SOCIAL EXCHANGE THEORY

Abstract

This research investigates the influence of Total Cost of Ownership (TCO) in buyer-supplier negotiation in different power settings. The study replicates Abbeele et al. (2009) paper, with adjustments, in Brazil, and uses Social Exchange Theory as a theoretical support. We conducted a laboratorial experiment similar to that of Abbeele et al. (2009), regarding a simulated negotiation process for leasing a machine, in which researchers controlled both cost information and bargaining power of the buyer. The results of our experiment confirm the findings of Abbeele et al. (2009) about the importance of cost information in buyer-supplier negotiations. Cost information moderates the effect of power on negotiation outcomes, reducing the performance disadvantage of less powerful buyers, and also moderates the relation between power and negotiation behavior. Therefore, the findings of this study show the importance the total cost of ownership to the negotiation as moderator of a possible bargaining power deficit.