What is Bargaining?

Learn about Bargaining with Jagdeep

Movie Case Study

The scene that you just saw shows how Fatik Chand Bonopadhya (played by Jagdeep) is trying to buy a perfume called ‘Evening in Paris’. The rate of this perfume is Rs. 330.

He asks for a bargain on the perfume, to which the lady replies by showing him the ‘Fixed Rate’ banner. He gradually starts taking out Rs. 5 from different places he has hidden them. Finally, he accumulates  Rs. 325. After listening to his sob story, she gives him an Rs. 5 discount and gives the perfume to him for Rs. 325.

What is Bargaining?

Bargaining is an activity in which the buyer and seller debate the price and reach an optimal price that is beneficial to both parties. Bargaining is the opposite of a fixed-rate system. Similar to the scene we saw, the lady in the scene lifts the ‘Fixed rate’ banner to show it to Fatik Chand indicating that you can’t bargain for the perfume. Bargaining allows price discrimination and enjoys higher consumers. A bargain is used in many subjects and in different areas. Some of them are given below:

Bargaining Games:

Game theory is the science of decision-making. It is used in International relations and Military training as well. Nash Equilibrium is a concept in game theory, It suggests that no decisions are taken in isolation and a player cannot change its decision without being in agreement with the other player. In businesses, two related companies in the same industry might follow the collaboration strategy while fixing their prices so that each can share margins, without this, both firms stand to lose.

Collective Bargaining:

This term is used in trade-union bargaining. It is a concept given by the National Labor Relations which simply means that both the management and labor are required by the law to negotiate wages, hours, and terms and conditions of employment in good faith.

Bargain Purchase Option:

A bargain purchase option is a lease provision in which the lessee is given the option to acquire the leased asset for a price sufficiently lower than the expected fair market value. The exercise price of such an option appears to be reasonably certain at the time of the inception of the lease.

In India, this clause does not usually appear in the lease agreement.

Bargain Renewal Option:

This is a lease provision that allows the lessee at the expiry of the first lease period, at his option to renew the lease for a rental sufficiency lower than the expected fair rental value of the property.

References: Financial Services: MY Khan

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