A firm’s bargaining power is low when the host government places a low

QUESTION

A firm’s bargaining power is low when the host government places a low value on what the firm has to offer.

Indicate whether the statement is true or false.

ANSWER

TRUE
From the perspective of a firm negotiating the terms of an investment with a host government, the firm’s bargaining power is high when the host government places a high value on what the firm has to offer, the number of comparable alternatives open to the firm is greater, and the firm has a long time in which to complete the negotiations. The converse also holds. The firm’s bargaining power is low when the host government places a low value on what the firm has to offer, the number of comparable alternatives open to the firm is fewer, and the firm has a short time in which to complete the negotiations.