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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"A Fine is a Price,"
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- 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.
- Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
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- 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. Full references (including those not matched with items on IDEAS)
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