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Contracting contractors


  • Singer, Marcos
  • Donoso, Patricio


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.

Suggested Citation

  • Singer, Marcos & Donoso, Patricio, 2011. "Contracting contractors," Journal of Business Research, Elsevier, vol. 64(3), pages 338-343, March.
  • Handle: RePEc:eee:jbrese:v:64:y:2011:i:3:p:338-343

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    References listed on IDEAS

    1. Gneezy, Uri & Rustichini, Aldo, 2000. "A Fine is a Price," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 1-17, January.
    2. Kakabadse, Andrew & Kakabadse, Nada, 2002. "Trends in Outsourcing:: Contrasting USA and Europe," European Management Journal, Elsevier, vol. 20(2), pages 189-198, April.
    3. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, June.
    4. Paul Oyer, 2004. "Why Do Firms Use Incentives That Have No Incentive Effects?," Journal of Finance, American Finance Association, vol. 59(4), pages 1619-1650, August.
    5. Marcos Singer & Patricio Donoso & Sven Widdel, 2007. "¿Premian Las Tarifas El Desempeño Del Transportista?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 10(1), pages 21-55.
    6. Jack A. Nickerson & Brian S. Silverman, 2003. "Why aren't all Truck Drivers Owner-Operators? Asset Ownership and the Employment Relation in Interstate for-hire Trucking," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(1), pages 91-118, March.
    7. 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.
    8. George P. Baker & Thomas N. Hubbard, 2004. "Contractibility and Asset Ownership: On-Board Computers and Governance in U. S. Trucking," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1443-1479.
    9. 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.
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    Cited by:

    1. Brenes, Esteban R. & Metzger, Michael & Requena, Bernardo, 2011. "Strategic management in Latin America: Issues and assessment," Journal of Business Research, Elsevier, vol. 64(3), pages 231-235, March.


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