Opportunism is one transactional partner’s execution of such devious plans that others cannot help blaming him or her for injustice unless they blame them-selves for inattentiveness, complacency, or timidity. Stockholders, suppliers, buyers, insurers, employers, and citizens must always be vigilant: never expecting deviousness is utopian.
Contracts usually involve consideration. Each party provides benefit to another, planning his or her own net benefit. No given distributive ratio of fair outcomes exists. Candidly using others instrumentally is a fair procedure. If one-sided outcomes arise consensually, such fair procedure counts as fairness of substantive outcome. Hence, procedural injustice counts as substantive injustice. Undisclosed plans are devious. Impromptu ploys, too, deviate from consensus, if any partner, farsighted enough, would have required them to be forsworn. Schemes are very devious if, having been forsworn, they are executed anyway. Predictable outcomes, however, cannot be blamed on deviousness.
A Contested Example
In 1926 General Motors bought its body supplier, Fisher Body, outright. Sixty percent owned by GM since 1919, Fisher Body supplied GM at cost plus 17.6 percent. From 1923 to 1925, Fisher doubled its return on assets to 17.3 percent as transport costs burgeoned. GM was used to colocation by Fisher. As demand for GM cars boomed, however, colocation no longer suited Fisher: from 1924, no new Fisher plant was sited near GM. Such unhelpfulness was predictable, given on-cost profits. By conceding 17.6 percent on-cost, probably overestimating its power to persuade Fisher not to take advantage, GM consented to potential injury. An untoward share of profit looks substantively unjust, but no procedural injustice was done. Only a loyal steward might be expected disinterestedly to undo what GM wittingly accepted. According to Oliver Williamson, the General Motors/Fisher Body case, though factually disputed, illustrates contractual friction.
Evidence
Opportunism is not evident unless one partner misleads the other. Calculated opportunism exists if facts or intentions, knowledge of which would disquiet a trading partner, are deliberately misrepresented. Otherwise, a sufficient sign of opportunism is that, impromptu and post contract, a crafty inclination emerges: relying on facts not known previously to redistribute net benefit or forming redistributive intentions not at first contemplated. This state of mind is dispositional, not intentional.
Williamson defines opportunism as guileful self-seeking. Instrumental self-interest is open. Candid deals victimize no one. Misrepresentation lulls dupes into devious deals. The spirit of markets is, doubtless, not unequivocally caveat emptor (vendor). Goodwill and courtesy subsist. Yet trade is risky if gains from breaking solemn pledges outweigh self-enforced fairness. Opportunism need be neither feral nor pervasive, but as tricksters occur randomly, distrust abounds and must be mitigated. Arrangements such as vertical integration, not necessarily anticompetitive by intent, often are designed primarily for private dispute resolution, whereas sovereign dispute resolution is impracticable.
Mitigation
Opportunists thrive on “impacted” information: conditions that make it costly to scrutinize the state of the world, including a partner’s state of mind. Vertical integration facilitates scrutiny. Otherwise, beneficial deals are deterred, efficient trades frustrated, and costly precautions induced for fear of opportunism. Sellers eschew price discrimination, suspicious of cunning buyers pleading poverty or of arbitrageurs. Though scale economies are available, industry rivals may not outsource research to one another because a sly supplier of knowledge might distort it. Market failure also explains integration of research and development: afraid to be gulled, independent researchers hide the slightest clues to their ideas in case they complement alternative ideas already partly formed by others.
Insurers cannot guess whether clients will be negligent after they are insured; neither can they easily uncover deceit. Experience rating (familiarization with partners’ characteristics) ranks partners by their probity. Insurers offer counter opportunist incentives, such as discounts for proven clients that eschew petty or dishonest claims, and abate risk. Because insurers pool information, risky clients struggle to get better deals elsewhere when their charges rise with each claim.
Penalized like flighty insurance claimants, job quitters encounter rules mandating entry-level pay when they flit from job to job. Employers using cumulative audits of overall performance eventually pay premiums to highly rated employees, just as insurers eventually grant discounts.
Some firms need distinctively skilled workers who are adaptable to vagaries in technological, trade, and product life cycles. They need people who, without haggling, helpfully share tricks of the trade with apprentices. Codified ideas accessible to employers can be told to recruits, but even if they are similarly qualified, they cannot be told the ropes; someone must show them. Incumbents gain over time a monopoly grasp of idiosyncratic processes: they may, unhelpfully, interact inscrutably with recruits and perform so perfunctorily as to squander a firm’s uniqueness.
Internal labor-market rules sweeten a firm’s atmosphere; bonds of “citizenship” unlock impacted information. Upstarts from outside, faking eligibility, are thwarted by port-of-entry rules. Not paid specifically on the basis of performance (quid pro quo) but rewarded after tactful, cumulative experience rating and upon achieving seniority, incumbents are protected from opportunistic queue jumpers.
Antitrust authorities may compel release of complete know-how. Operational kinks are ironed out by sharing insight into makeshift solutions with customers. Not disclosing intuitive know-how embedded within a supplier’s experience may suggest caginess in relations with customers, in whose work such inscrutability begets inefficiency; uses of supplies may be shown unhelpfully. Unhelpful showing and selective disclosure of know-how, or its distortion, betokens a more begrudging disposition than customers expect. It is understandable that customers are so treated— they are potential rivals, after all—but unfair if an artful dodger led them to expect openness.
Symmetrical Information, Asymmetrical Audacity
Trading partners necessarily omit to plan for all unforeseen contingencies. Starting with symmetrical information, sometimes they are not symmetrically creative concerning what is to come. Not designedly contrived by one partner, emergent gray areas prompt anyone so disposed to improvise impromptu. A maintenance firm, for example, stipulated payment by a rail track owner after workers were on site. It bought motorcycles so its employees were punctual. Supplies were delayed by congested traffic.
Opportunism sometimes involves gall: Traders are not symmetrically bold. Partners may hold symmetrical information, but knowing his state of mind full well, the confident opportunist often challenges timid victims to act on that knowledge.
A hotelier boasted of his skill, years earlier, in “stringing creditors along.” His checks bore inconsistent words and numbers; and although he needed an associate’s signature, he signed solo. Paying “as late as possible” was a “question of nerve,” he said. Cunningly, not impromptu, he shifted costs to suppliers without consensus. In commercial dealing, governments, too, are disposed—or intend—to pay late. As to the social contract, it is stealthily breached in numerous sovereign abuses of the rule of law.
Conditions
Two conditions must exist to constitute opportunism. The first is bounded rationality. This term means that only a little of what needs to be known can be known. What little is known, moreover, is complex and subject to change. Anyone who is boundlessly rational would not be prey to opportunism, unless he were timid, but would know everything about the state of mind of potential and current trading partners, and about all possible states of the world bearing on all plans.
The second condition is small numbers. Victims of opportunism would not be its prey if large-numbers bargaining were not, as is common, subject to fundamental transformation into small-numbers situations. A supplier or employee initially interchangeable with others grows with experience and by embedding himself becomes virtually irreplaceable. In large-numbers situations, one can turn away from one to many other partners. Often, though, victims sink by degrees into small-numbers situations with partners to whom, for the time being, they are inextricably wedded.
Functionaries (And Predators)
According to Oliver Williamson, in large U-form and corrupted M-form organizations, functionaries entrenched in enclaves of private power enjoy various discretionary abuses: uncompetitive supply, persistent cross-subsidy of pet projects, and empire building, among others. Given stockholders’ inhibited propensity to displace them, their irreducible opportunism is abetted by diffuse accountability, partisan misrepresentations, and weak auditors, lost in byways of impacted information.
Using qualified majority voting, concert parties, poison pills, stock dilution (or support), vexatious litigation, and so on, miscreant functionaries defy stockholders’ displacement efforts. Predators too, quite opportunistically, discredit incumbent managers, who need deep pockets to restore stockholder confidence.
Oligopolists are secretive mines of impacted information, inscrutable to one another. Therefore, collusion sufficiently concerted to mimic market dominance or monopoly is problematical. Accordingly, natural (and patented) monopoly aside, dissolving monopolies into oligopolies is not quite fruitless.
Bibliography:
- Jeffrey R. Cohen, Lori Holder-Webb, David J. Sharp, and Laurie W. Pant, “The Effects of Perceived Fairness on Opportunistic Behavior,” Contemporary Accounting Research (v.24/4, 2007);
- Daily Telegraph (February 5, 1996);
- Daily Telegraph (October 18, 2003);
- Benjamin Klein, “The Economic Lessons of Fisher Body-General Motors,” International Journal of the Economics of Business (v.14/1, 2007);
- John Rawls, A Theory of Justice (Oxford University Press, 1972);
- Oliver Williamson, Markets and Hierarchies: Analysis and Anti-Trust Implications (Free Press, 1975);
- Oliver Williamson, “The Theory of the Firm as Governance Structure: From Choice to Contract,” Journal of Economic Perspectives (v.16/3, 2002).
This example Opportunistic Behavior Essay is published for educational and informational purposes only. If you need a custom essay or research paper on this topic please use our writing services. EssayEmpire.com offers reliable custom essay writing services that can help you to receive high grades and impress your professors with the quality of each essay or research paper you hand in.
See also:
ORDER HIGH QUALITY CUSTOM PAPER
Always on-time
Plagiarism-Free
100% Confidentiality
Special offer!
