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On the value of partial commitment for cooperative investment in buyer-supplier relationship

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  • José De Sousa

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, ADIS - Analyse des Dynamiques Industrielles et Sociales - Département d'Economie - Université Paris XI - Paris Sud)

  • Xavier Fairise

    (TEPP - Travail, Emploi et Politiques Publiques - CNRS : FR3435 - Université Paris-Est Marne-la-Vallée (UPEMLV), GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - Université du Maine)

Abstract

Does formal contracting foster cooperation in a buyer-supplier relationship? In line with the literature, we find that a renegotiable contract with relationshipspecific joint investments does not make it possible to reach the first-best. However, we show that a renegotiable contract may induce more cooperation than an informal arrangement can. This result may help to understand how cooperation emerges in Japanese procurement practices, which typically involve relationshipspecific joint investments and renegotiable contracts.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00870060.

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Date of creation: 07 May 2013
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Handle: RePEc:hal:cesptp:halshs-00870060

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Keywords: incomplete contracts ; relationship-specific investments ; cooperation;

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  1. Grossman, Sanford J & Hart, Oliver, 1985. "The Cost and Benefits of Ownership: A Theory of Vertical and Lateral Integration," CEPR Discussion Papers, C.E.P.R. Discussion Papers 70, C.E.P.R. Discussion Papers.
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  14. Donald B. Hausch & Yeon-Koo Che, 1999. "Cooperative Investments and the Value of Contracting," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 125-147, March.
  15. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Scholarly Articles 12375014, Harvard University Department of Economics.
  16. Larry D. Qiu & Barbara J. Spencer, 2001. "Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy," NBER Working Papers 8279, National Bureau of Economic Research, Inc.
  17. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 21(2), pages 297-326, October.
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