On the value of partial commitment for cooperative investment in buyer-supplier relationship
Does formal contracting foster cooperation in a buyer-supplier relationship? In line with the literature, we ﬁnd that a renegotiable contract with relationshipspeciﬁc 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 can. This result may help to understand how cooperation emerges in Japanese procurement practices, which typically involve relationshipspeciﬁc joint investments and renegotiable contracts.
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