A small town has a thriving restaurant scene, with over a 150 dining establishments. Seeking to reduce costs, several restaurants join together to negotiate for table linen supplies and laundering. How might that impact firms in the table linen industry? Firms have decreased bargaining power, because the service they provide is cyclical (more around the holidays and during festivals and sporting events) rather than steady.
Firms have increased bargaining power, since there are so many of them.
Firms have decreased bargaining power, since they are negotiating with a larger block of buyers and competing against each other.
Firms have increased bargaining power relative to the restaurants since they control valuable and necessary services.
Answers
The given situation deals with the case of demand and bargaining power in terms of seasonal profits.
How might that impact firms in the table linen industry?
As several restaurants joined together in a group demanding to reduce the cost of Table linen and the laundering rate, this impact the firm in following way:
Since due to less availability of work as the table linens are only required at times and are durable product, the firm negotiating power is decreased and they are not able to make profits.
In order to fulfill the demand and make profits, firm need to decrease the workers working with them and hence the Factors of production suffer.
Firm have decreased the bargaining power as this work depends on the seasonal basis and not continuous.
Firms have decreased bargaining power, since they are negotiating with a larger block of buyers and competing against each other.
This is called Cartel in the economy where many parties combine and fix the prices of a particular commodity. No other can question their rates and hence the market forces work according to their wish.
They can manipulate the market prices and the profits of other firms.
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