Bargaining in the European automotive Industry: coopetitive models and laboratory experiments

Current empirical studies in the automotive industry highlight the rise of systematic outsourcing and multi–tier hierarchical networks of suppliers as the dominant strategy of automotive manufacturers. We summarize the empirical evidence from the European automotive sector and we highlight the coopetitive nature of industry relations between original equipment manufacturers (OEMs), tier–1s and tier–2s suppliers. We propose a three–person multi–stage bargaining game encompassing the negotiation process typically occurring within European automotive supply chains. Results from laboratory experiments are qualitatively consistent with field evidence and help to explain why current bargaining practices in the industry prevent the development of value–increasing coopetitive relationships. In the lab, exactly as in the field, opportunistic behavior by tier–1s, fueled by asymmetric information, trigger reciprocal concerns by the other players involved in the negotiation, thus strongly affecting the final outcome. In turn, the disclosure of informational asymmetries results in increased fair play by the participants in the negotiation and in less observed opportunistic behavior, which in turn eases the bargaining process, increases cooperation, eventually allowing all subjects to build sustainable and value–enhancing coopetitive agreements.