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Contracting contractors

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Author Info

  • Singer, Marcos
  • Donoso, Patricio

Abstract

Many companies relay on contractors to execute different tasks of the value chain. This paper develops an agency model subject to moral hazard to study the general structure of the contract offered by a firm (the principal) to several contractors (agents) that perform the same task. A Generalized Least Squares regression tests the model with a panel data of 58 carriers that work for a shipper in Santiago, over 93 weeks. The regression verifies that the principal rewards some performance dimensions, but neglects others. The regression also confirms that contracting prices are sensitive to the alternatives available for the company and the contractors.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Business Research.

Volume (Year): 64 (2011)
Issue (Month): 3 (March)
Pages: 338-343

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Handle: RePEc:eee:jbrese:v:64:y:2011:i:3:p:338-343

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Web page: http://www.elsevier.com/locate/jbusres

Related research

Keywords: Contractors Agency relationship Incentives;

References

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  1. Francine Lafontaine & Scott E. Masten, 2002. "Contracting in the Absence of Specific Investments and Moral Hazard: Understanding Carrier-Driver Relations in U.S. Trucking," NBER Working Papers 8859, National Bureau of Economic Research, Inc.
  2. Uri Gneezy & Aldo Rustichini, 2000. "A fine is a price," Natural Field Experiments 00258, The Field Experiments Website.
  3. George B. Kleindorfer & Liam O'Neill & Ram Ganeshan, 1998. "Validation in Simulation: Various Positions in the Philosophy of Science," Management Science, INFORMS, vol. 44(8), pages 1087-1099, August.
  4. Paul Oyer, 2000. "Why Do Firms Use Incentives that Have No Incentive Effects?," Econometric Society World Congress 2000 Contributed Papers 1440, Econometric Society.
  5. Kakabadse, Andrew & Kakabadse, Nada, 2002. "Trends in Outsourcing:: Contrasting USA and Europe," European Management Journal, Elsevier, vol. 20(2), pages 189-198, April.
  6. George P. Baker & Thomas N. Hubbard, 2004. "Contractibility and Asset Ownership: On-board Computers and Governance in U. S. Trucking," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1443-1479, November.
  7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
  8. Jack A. Nickerson & Brian S. Silverman, 2003. "Why aren't all Truck Drivers Owner-Operators? Asset Ownership and the Employment Relation in Interstate for-hire Trucking," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 91-118, 03.
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Cited by:
  1. Brenes, Esteban R. & Metzger, Michael & Requena, Bernardo, 2011. "Strategic management in Latin America: Issues and assessment," Journal of Business Research, Elsevier, vol. 64(3), pages 231-235, March.

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