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Do we need handshakes to cooperate in buyer-supplier relationships?

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  • De Sousa, José
  • Fairise, Xavier

Abstract

Does formal contracting foster cooperation in a buyer-supplier relationship? In line with the literature, we find that a renegotiable contract with relationship-specific 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. This result may help to understand how cooperation emerges in Japanese procurement practices, which typically involve relationship-specific joint investments and renegotiable contracts.

Suggested Citation

  • De Sousa, José & Fairise, Xavier, 2010. "Do we need handshakes to cooperate in buyer-supplier relationships?," Working Papers 210389, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    • Handle: RePEc:ags:inrasl:210389
    DOI: 10.22004/ag.econ.210389
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    References listed on IDEAS

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    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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