The limitations of bargaining theory: a case study of the International Petroleum Company in Peru

The usual bargaining model used to analyze the interaction of foreign companies and developing countries is inadequate because its political assumptions are usually misleading and tend to abstract from a highly complex reality. The case of the International Petroleum Company in Peru is used to illustrate how political parties there were constrained by the presence of a large foreign firm to act in certain ways which could not have been predicted by a ‘rational’ model of bargaining.