Structuring University– Private Partnerships for Developing and Commercializing Transgenic Horticultural Crops - Transgenic Horticultural Crops: Challenges and Opportunities - page 238

S taGe 2: d ecISIon m akInG throuGh b arGaInInG
In.Stage.2,.the.partners.jointly.manage.the.partnership.by.making.decisions.based.on.
a.two-person,.two-phase.bargaining.game.*.In.the.irst.phase,.the.public.partner.and.
the.private.partner.decide.what.threats.to.invoke.if.no.agreement.is.reached,.where.
the.threat.strategies.are.chosen.to.maximize.their.pay-off.while.minimizing.effort.
and.are.based.on.the.control.rights.and.property.rights.assigned.in.Stage.1..These.
threat. strategies. determine. the. disagreement. point. and. are. taken. as. given. in. the.
second.phase..These.strategies.need.not.actually.be.carried.out.and.may.not.even.be.
explicit..All.that.is.required.is.the.potential.of.threat..In.this.stage,.the.partners.will.
achieve.an.eficient.outcome,.in.which.the.partner.with.control.rights.implements.a.
decision,.and.a.pay-off.is.exchanged.between.the.partners..The.partner.holding.the.
control.rights.is.aware.of.the.noncontrolling.partner's.reaction.function.and.unilat-
erally.selects.an.action.that.maximizes.the.controlling.partner's.objective.function.
given. the. noncontrolling. partner's. reaction. pattern. 13 . The. reaction. function. allows.
the.noncontrolling.partner.to.inluence.controlling.partner's.decision.
Beyond. their. choice. of. threat. strategy,. each. partner. exercises. control. over. the.
resources.dedicated.to.the.relationship.through.its.choices.in.Stage.1..For.example,.
if.a.public.institution.is.approached.by.a.single.irm.and.considers.only.their.offer,.
it.has.a.very.limited.choice.set.and.is.likely.to.have.little.leverage.over.that.irm's.
resources..In.contrast,.if.a.public.institution.considers.multiple.offers.from.partners.
with.varied.assets,.its.choice.set.is.broader.
S taGe 3: I S t here a S hock ?
In.the.inal.stage.of.the.agreement.(Stage.3),.the.partners.deal.with.unanticipated.
shocks..When.there.is.a.shock,.the.partners.have.two.options:.(1).they.can.conclude.
the.partnership.and.exercise.their.back-end.property.rights.over.the.partnership's.
property,.or.(2).they.can.renegotiate.the.control.rights.and.property.rights.assigned.
and.begin.again.at.Stage.1..If.the.partners.choose.to.renegotiate,.the.allocation.of.
bargaining.power.in.renegotiation.may.be.different.from.the.allocation.in.the.pre-
vious.stages..By.this.stage,.a.partner.might.ind.themselves.in.a.more.vulnerable.
position.due.to.the.nature.of.the.shock.or.relationship-speciic.investments..This.
potential.for.changes.in.relative.bargaining.power.could.lead.to.a.reassignment.of.
control.rights.
After. Stage. 3,. the. partners. assess. the. outcome. of. their. partnership. and. con-
sider. whether. to. renew. the. agreement.. Although. many. public. institutions. have.
developed.policies.to.evaluate.partnerships,.there.is.no.generally.accepted.method.
for. formal. review. of. partnerships. with. private. institutions.. These. methods. rely.
mainly.on.anecdotal.feedback.from.involved.personnel.to.measure.the.merits.of.
speciied.projects.and.to.monitor.unintended.consequences..The.informal.reviews.
and.vague.impressions.of.both.partners.are.coupled.with.more.tangible.outcomes,.
such.as.the.project's.revenue,.in.assessing.whether.a.partnership.was.successful.
or.not.
* . See.Rausser.et.al. 18 .for.an.extension.of.this.analysis.to.a.multi-person.bargaining.game.