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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 - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, ADIS - Analyse des Dynamiques Industrielles et Sociales - UP11 - Université Paris-Sud - Paris 11 - Département d'Economie)

  • Xavier Fairise

    (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS - Centre National de la Recherche Scientifique, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

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.

Suggested Citation

  • José de Sousa & Xavier Fairise, 2013. "On the value of partial commitment for cooperative investment in buyer-supplier relationship," Working Papers halshs-00870060, HAL.
    • Handle: RePEc:hal:wpaper:halshs-00870060
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00870060
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    References listed on IDEAS

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    More about this item

    Keywords

    incomplete contracts; relationship-specific investments; cooperation;
    All these keywords.

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory

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