The Market as Negotiation

64 Pages Posted: 4 Feb 2021 Last revised: 19 Feb 2021

See all articles by Rebecca E. Hollander-Blumoff

Rebecca E. Hollander-Blumoff

Washington University in St. Louis - School of Law

Matthew T. Bodie

University of Minnesota Law School


Our economic system counts on markets to allocate most of our societal resources. The law often treats markets as discrete entities, with a native intelligence and structure that provides clear answers to questions about prices and terms. In reality, of course, markets are much messier—they are agglomerations of negotiations by individual parties. Despite theoretical and empirical work on markets and on negotiation, legal scholars have largely overlooked the connection between the two areas in considering how markets are constructed and regulated.

This Article brings together scholarship in law, economics, sociology, and psychology to better understand the role that negotiation plays in different types of marketplaces. Establishing the concept of negotiation variance, we create a preliminary taxonomy of factors that shape such variance and examine the differences between markets as to the effects that negotiation can have on transactions. In markets with high negotiation variance, parties can use their negotiation effectiveness to get much better deals. Although the law has not generally recognized negotiation’s role in markets explicitly, judges and policymakers have at times taken negotiation variance into account implicitly, making exceptions to standard doctrines to accommodate unbalanced outcomes. The Article examines the doctrines of common-law contract that reflect an understanding of negotiation’s impact, as well as exploring three particular markets where high-variance negotiation has a significant role: lawsuit settlements, corporate control, and employment. These examples show how the law takes negotiation variance into account and illustrates the challenges in developing a response to individual negotiation differences across markets.

Keywords: negotiation, markets, market price, contract law, appraisal rights, psychology

JEL Classification: D40, D86, K12, K22, K31, K41

Suggested Citation

Hollander-Blumoff, Rebecca E. and Bodie, Matthew T., The Market as Negotiation. Notre Dame Law Review, Vol. 96, No. 3, 2021, Saint Louis U. Legal Studies Research Paper No. 2021-04, Available at SSRN: or

Rebecca E. Hollander-Blumoff

Washington University in St. Louis - School of Law ( email )

One Brookings Drive
Campus Box 1120
St. Louis, MO 63137
United States

Matthew T. Bodie (Contact Author)

University of Minnesota Law School ( email )

United States

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