The quasi-judicial role of large retailers: An efficiency hypothesis of their relation with suppliers
AbstractThe paper explores an efficiency hypothesis regarding the contractual process between large retailers, such as Wal-Mart and Carrefour, and their suppliers. The empirical evidence presented supports the idea that large retailers play a quasi-judicial role, acting as "courts of first instance" in their relationships with suppliers. In this role, large retailers adjust the terms of trade to on-going changes and sanction performance failures, sometimes delaying payments. A potential abuse of their position is limited by the need for re-contracting and preserving their reputations. Suppliers renew their confidence in their retailers on a yearly basis, through writing new contracts. This renovation contradicts the alternative hypothesis that suppliers are expropriated by large retailers as a consequence of specific investments.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 445.
Date of creation: Jan 2000
Date of revision:
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Web page: http://www.econ.upf.edu/
Retailing; distribution; contracts; transaction costs; self-enforcement;
Other versions of this item:
- Benito Arrunada, 2000. "The Quasi-Judicial Role of Large Retailers : An Efficiency Hypothesis of their Relation with Suppliers," Revue d'Ã‰conomie Industrielle, Programme National PersÃ©e, vol. 92(1), pages 277-296.
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
- K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
- M31 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising - - - Marketing
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