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Pricing negotiation in contract farming

Author

Listed:
  • Yuanita Handayati
  • Togar M. Simatupang
  • Tomy Perdana
  • Manahan Siallagan

Abstract

An agricultural pricing mechanism achieved through a process of negotiation is superior to cost-based or auction-based pricing in achieving goal congruence and evaluating subunit performance. This paper illustrates the negotiation process in defining agricultural prices by considering the emotions of negotiators. The emotions of both buyer and seller are captured to illustrate the impact on the duration, agreed price and result of negotiations. The simulation shows that when both buyer and seller experience heightened emotions, the shortest negotiations are achieved. On the other hand, the most protracted negotiations, which usually culminate in failure, result when both buyer and seller exhibit anger. Moreover, different combinations of emotions on the part of the buyer and seller suggest that stable emotions will produce a mutually acceptable price. Agent-based modelling was used as the methodology to simulate the price negotiation process.

Suggested Citation

  • Yuanita Handayati & Togar M. Simatupang & Tomy Perdana & Manahan Siallagan, 2019. "Pricing negotiation in contract farming," International Journal of Business and Globalisation, Inderscience Enterprises Ltd, vol. 23(2), pages 174-192.
    • Handle: RePEc:ids:ijbglo:v:23:y:2019:i:2:p:174-192
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