The term "opportunistic behavior" exists in several sciences at once and everywhere it has a different meaning. There is such a concept in economics. This implies the behavior of a market participant who wants to cash in on his partners. Such people, for their own benefit, are ready to move away from fulfilling certain conditions in the contract.
What is opportunism in the economy
Economic theories view opportunistic behavior differently. On the one hand, deceiving your partners for the sole benefit is a big risk. If market participants find out that a person has a damaged reputation, then, of course, they will not cooperate with him. On the other hand, some eminent economists, including Hobbes, called opportunistic behavior in their books the “natural state” of man.
If society did not have a state with its regulatory functions, then people would not have any barriers to deceive each other. Hobbes considered opportunistic behavior in such conditions "a war of all against all." There are two factors that are sources of dangers in economic relations. The first is the property ownership vulnerability. If there is no law, it is easier to take it away. Secondly, this is the absence of any guarantees for the implementation of the agreements in the contract.
That is, a strong state that monitors the legitimacy of transactions between people is the very factor due to which each market participant can feel relaxed. In this case, citizens should not be afraid of the problem of opportunistic behavior. Even if the party to the transaction violates the law and deceives the partner, he can always be brought to justice with the help of an arbitration court.
Importance of reputation
AT economic relations Reputation factor is very important. People prefer to deal only with those whom they know well. Trustworthy partners can always count on continued cooperation.
The reputation mechanism becomes even more significant if the parties enter into a self-fulfilling agreement. This is such a contract, the protection of which does not provide for the intervention of a third party. Two people can cooperate with each other without any third party guarantees if they trust each other. Therefore, in the market it is so important not to violate the terms of the transaction. If an entrepreneur (or, for example, a joint-stock company) each time clearly follows his obligations under the contract, new opportunities will always be open for him.
Conversely, if a person violates the agreement, he will become an outcast. Moreover, it does not matter what kind of opportunistic behavior they will be. The desire to cash in to the detriment of others is a black mark for the reputation of any company.
Respect for all parties
What can be the prevention of opportunistic behavior when it comes to a self-fulfilling agreement? In order for all parties to the transaction to be satisfied, their interests should be equally satisfied according to the terms of the contract. Suppose that company A produces goods for company B. If the manufacturer begins to receive decent pay, then he will not have reason to think about how to reduce his costs due to the deterioration of product quality.
That is, ways to prevent opportunistic behavior come down to following the rule that each party to the transaction must be satisfied with the conditions agreed upon for itself.The clearer, more honest and transparent the conditions of the contract, the greater the chance that the partners will not deceive each other.
Types of opportunistic behavior
There are several kinds of opportunistic behavior. It may be labor. This is the case when an employee of a company does not fulfill his obligations under a contract of employment (for example, leaves his job earlier). Also opportunism can be managerial. In a similar situation, equal partners in the transaction deceive each other.
A typical example of opportunistic behavior is the oppression of merchants in medieval European cities. At that time, trade was a particularly dangerous enterprise due to the fact that not a single merchant could feel safe in a foreign country.
Hanseatic League example
In order for the authorities (for example, in the person of the city) not to reach opportunistic behavior, the Hanseatic League was created. It included the largest shopping centers in Germany at that time. What did the Hansa do? She prevented opportunistic behavior by being a source of reliable commitment for merchants from all over Europe.
Germany was a fragmented country, there was no one-man power. Many princes, dukes, etc., tried to establish mutually beneficial relations with the Hansa. This was useful for the local authorities, because in the cities of the union trade was much more active, which allowed to receive additional tax payments.
Protecting the interests of market participants
The Hanseatic League defended the interests of merchants with the help of sanctions against those cities in which power oppressed merchants. For example, this happened in 1358. Then the authorities of the city of Bruges could not ensure the safety of merchants from Germany. Owners of expensive goods could be robbed or simply deceived during the transaction, after which they had nowhere to go for help.
The Hanseatic League joined in this conflict. It included dozens of the richest European cities. All of them simultaneously imposed sanctions against Brugge. The embargo led to the fact that this city could not trade with its neighbors and began to bargain. After that, Bruges had to fulfill their obligations to merchants. The opportunistic behavior of the city authorities ceased only after the intervention of a powerful third force. The Hanseatic League really had great influence in European trade, thanks to which it could protect merchants in many countries. His influence came from the strict discipline of the member cities of the association. If a general decision was made (for example, to impose an embargo on the violator of agreements), then all members of the union complied with it.
Reputation and Law
Reputation, as a factor helping to avoid opportunistic behavior, is effective only in a static society, where the same laws have been in force for many years. When participants in a transaction know that reliable norms and rules have been adopted in the environment, their trust in each other and confidence increase. Changing conditions, on the contrary, entail instability in business relations and opportunistic behavior. The economy develops differently in small and large societies.
The larger the market and population involved in trade, the less significant the reputation mechanism becomes. He is being replaced by law. In medieval Europe, the basis of relations between traders were merchants' codes of conduct. These were unwritten norms of behavior accepted as a tradition.
State struggle against opportunistic behavior
When the New World was opened and European markets significantly increased, it became extremely difficult to regulate relations using the reputation mechanism. The opportunistic behavior of some merchants could only be stopped with state intervention in the economy. In the Middle Ages, royal power was extremely weak due to the triumph of feudalism.Now the political center in each country began to dictate the laws of economic relations. Fees were introduced, deceivers and speculators were prosecuted by the court, etc. Gradually, a modern system developed, the basis of which was clear and universal legislation. State influence (imprisonment, confiscation of property) turned out to be the best way to prevent opportunistic behavior in the economy.
The mechanism of reputation turned into legislative norms gradually. First, a system of commercial law appeared in Europe, as well as informal judges who disseminated information about malicious violators throughout the global market. For example, this was the case in the 12th – 13th centuries. in french champagne. The fairs of this region were the most important link between Northern and Southern Europe. Merchants self-organized in order to stop the opportunistic behavior of attackers. Gradually, this role of the moderator of trade took over the state.
