Contractual Justice and the Index of Bargaining Power of Tenants in the Iranian Housing Sector

Authors

Department of Applied Economics, University of Allameh Tabataba'i, Tehran, Iran.

10.22059/ier.2022.90035

Abstract

Contract theory is the study of how contracts develop among economic agents. The imbalance in the bargaining power of the contract parties causes a crisis in the market, particularly in the housing sector. Countries often adopt specific laws to support tenants and increase their bargaining power, thus improving the indexes measuring contractual justice. Islam also offers mechanisms that can prevent possible unfair consequences in contractual relationships. The present study used the method of analytic hierarchy process (AHP) to evaluate the mechanisms permitted by Islam to increase the bargaining power of tenants. The bargaining power index was calculated in three cases, before and after the Covid-19 pandemic and the case of introducing new conditions based on Islamic rules. The results showed that the application of such mechanisms could considerably improve the index of bargaining power of tenants by increasing it from 0.407 to 0.981. The figure, which even exceeds the global average of 0.751, is considered a significant improvement in line with the Islamic regulations.

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