Since Marx, analysis of bargaining power has most often proceeded in conjunction with some variant of the Labor Theory of Value. Anchored thus, it is used to ill-effect: if one assumes that trade is zero-sum, and that labor is entitled to the entirety of its product, then one will see exploitation everywhere, and in utopian zeal tear at the very foundations of society.
Wedded to a sounder theory of value, however, bargaining power becomes an illuminating concept. It is axiomatic that a voluntary trade generates surplus value (or at least is expected to do so ex ante) due to the differing valuations of the two parties. Accordingly, the terms of the trade can fall anywhere within that surplus. Bargaining power is defined thus: the party with the greater bargaining power takes the greater share of this surplus.2 It is power to determine the terms of a trade in one’s favor.
If therefore economic value is subjective, then as a function of potential value surplus from a trade, bargaining power must also be subjective,3 in the sense that the desire to make the trade (and on the other hand, the inclination to walk away) is based solely on the subjective valuations of the two parties.