IDEAS home Printed from https://ideas.repec.org/p/cfr/cefirw/w0187.html
   My bibliography  Save this paper

Almost Anonymous Implicit Contracting

Author

Listed:
  • Paul Castãneda Dower

    () (New Economic School)

  • Andrei Bremzen

    () (New Economic School)

Abstract

Economists use relational or reputational concerns to explain the implicit enforcement of contracts. Both mechanisms require special assumptions concerning contracting parties' identities; in particular, these assumptions would not hold in one-period settings in which outcomes cannot affect reputation. In such a setting, this paper shows how a signaling mechanism can support the implicit enforcement of contracts that Pareto improve upon the null contract. Furthermore, this mechanism is independent of the discount factor and can outperform the relational contract in a range of cases. We find empirical support for our theory using contracts from nancing alliances in the biotech industry.

Suggested Citation

  • Paul Castãneda Dower & Andrei Bremzen, 2012. "Almost Anonymous Implicit Contracting," Working Papers w0187, Center for Economic and Financial Research (CEFIR).
  • Handle: RePEc:cfr:cefirw:w0187
    as

    Download full text from publisher

    File URL: http://www.cefir.ru/papers/WP187.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-785, July.
    2. Holmstrom, Bengt, 1989. "Agency costs and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 12(3), pages 305-327, December.
    3. Raghuram G. Rajan & Luigi Zingales, 1998. "Power in a Theory of the Firm," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 387-432.
    4. Oliver Hart & John Moore, 2008. "Contracts as Reference Points," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 1-48.
    5. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, January.
    6. Sudipto Bhattacharya & Sergei Guriev, 2006. "Patents vs. Trade Secrets: Knowledge Licensing and Spillover," Journal of the European Economic Association, MIT Press, vol. 4(6), pages 1112-1147, December.
    7. Ernst Fehr & Oliver Hart & Christian Zehnder, 2008. "Contracts as reference points � experimental evidence," IEW - Working Papers 393, Institute for Empirical Research in Economics - University of Zurich.
    8. Ernst Fehr & Oliver Hart & Christian Zehnder, 2011. "Contracts as Reference Points--Experimental Evidence," American Economic Review, American Economic Association, vol. 101(2), pages 493-525, April.
    9. Gin, Xavier & Yang, Dean, 2009. "Insurance, credit, and technology adoption: Field experimental evidencefrom Malawi," Journal of Development Economics, Elsevier, vol. 89(1), pages 1-11, May.
    10. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, vol. 93(1), pages 216-240, March.
    11. Akhmedov Akhmed & Suvorov Anton, 2014. "Discretionary Acquisition of Firm-Specific Human Capital under Non-verifiable Performance," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 14(1), pages 1-34, February.
    12. Kranton, Rachel E, 1996. "Reciprocal Exchange: A Self-Sustaining System," American Economic Review, American Economic Association, vol. 86(4), pages 830-851, September.
    13. Martimort, D. & Poudou, J.-C. & Sand-Zantman, W., 2006. "Contracting for an Innovation under Bilateral Asymmetric Information," Cahiers du LASER (LASER Working Papers) 2006.19, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1.
    14. Scott E. Masten & Renáta Kosová, 2013. "Post-sale service and the limits of reputation," Industrial and Corporate Change, Oxford University Press, vol. 22(6), pages 1663-1698, December.
    15. Carl Shapiro, 1983. "Premiums for High Quality Products as Returns to Reputations," The Quarterly Journal of Economics, Oxford University Press, vol. 98(4), pages 659-679.
    16. Holmström, Bengt, 1989. "Agency Costs and Innovation," Working Paper Series 214, Research Institute of Industrial Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Implicit contracts; biotech alliances; identity;

    JEL classification:

    • D29 - Microeconomics - - Production and Organizations - - - Other
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0187. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia Babich). General contact details of provider: http://edirc.repec.org/data/cefirru.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.