Almost Anonymous Implicit Contracting
AbstractEconomists use relational or reputational concerns to explain the implicit enforcement of contracts. Both mechanisms require special assumptions concerning contracting parties' identities; in particular, these assumptions would not hold in one-period settings in which outcomes cannot affect reputation. In such a setting, this paper shows how a signaling mechanism can support the implicit enforcement of contracts that Pareto improve upon the null contract. Furthermore, this mechanism is independent of the discount factor and can outperform the relational contract in a range of cases. We find empirical support for our theory using contracts from nancing alliances in the biotech industry.
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Bibliographic InfoPaper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0187.
Length: 52 pages
Date of creation: Sep 2012
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More information through EDIRC
Implicit contracts; biotech alliances; identity;
Find related papers by JEL classification:
- D29 - Microeconomics - - Production and Organizations - - - Other
- L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-15 (All new papers)
- NEP-CTA-2012-12-15 (Contract Theory & Applications)
- NEP-INO-2012-12-15 (Innovation)
- NEP-MIC-2012-12-15 (Microeconomics)
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