Week 4 -- Multilateral negotiation

These words might sound frightening… Multi-lateral. Negotiation. They’re not English, or at least, they’re not really used that much on this continent or any others.

The meaning is straightforward, though. A multi-lateral negotiation (condensed hereafter to ‘multilateral’) is a negotiation with multiple buyers AND/OR multiple sellers AND the people are selling are all buying and selling the same thing. In other words, whenever you have more than 2 people buying / selling something, we call that multilateral. There are many more rules than bilateral (bilateral means 2 people), enough to make your head spin. This is because symmetry does not necessarily apply anymore (see below) because we have to add something called competition that affects the price ranges we can agree on.

If there is a greater number of buyers than sellers (or vice versa), then the potential exists for competition to play a role in the price that’s agreed upon. In other words, if there are three buyers and only two sellers, the three buyers might bid the price up of the single good that is being bought and sold in this multilateral negotiation. Think of an auction, or a reverse auction. If more people want the item being purchased and are willing to pay for it, the price will rise; if there are three basketballs being sold and only one potential buyer, the price will fall. That’s what the graph is talking about in the class notes; that’s what Sven was trying to prove with his Red card / Black card example in class. Only one catch…