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Contractual Design and Functions - Evidence from Service Contracts in the European Air Transport Industry

Author

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  • Johannes Fuhr

    () (Workgroup for Infrastructure Policy (WIP), Technische Universität Berlin)

Abstract

Contracts within governance classes, e.g., alliances or supply chain contracts, display a great degree of variation in contractual design. In this paper, we explore (i) the alignment between provisions in functional classes and the underlying transaction attributes, and (ii) the impact of learning on transaction costs (via standardization of contract provisions). Drawing on a sample of 42 service contracts in the European air transport industry, we show that asset specificity has a dominant impact on the observed variation in all the provisions/attachments analyzed. The results do not support the proposition that individual transaction attributes drive the design of provisions in distinct functional dimensions (safeguarding, coordination, and contingency adaptability function). However, they demonstrate that the provision’s function determines whether standardization occurs in ‘learning arrangements’ at the industry level or at the firm level.

Suggested Citation

  • Johannes Fuhr, 2007. "Contractual Design and Functions - Evidence from Service Contracts in the European Air Transport Industry," Working Papers 2007-03, Center for Network Industries and Infrastructure (CNI).
  • Handle: RePEc:cni:wpaper:2007-03
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    References listed on IDEAS

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    More about this item

    Keywords

    Transaction Cost Economics; Contract Design; Contractual Function; Learning; Air Transport;

    JEL classification:

    • L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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