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On the value of partial commitment for cooperative investment in buyer-supplier relationship

  • José De Sousa

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS, ADIS - Analyse des Dynamiques Industrielles et Sociales - UP11 - Université Paris-Sud - Paris 11 - Département d'Economie)

  • Xavier Fairise

    (TEPP - Travail, Emploi et Politiques Publiques - UPEM - Université Paris-Est Marne-la-Vallée - CNRS, GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Université du Maine)

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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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00870060.

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Date of creation: 07 May 2013
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Handle: RePEc:hal:cesptp:halshs-00870060
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  1. Banri Asanuma, 1985. "The Organization of Parts Purchases in the Japanese Automotive Industry," Japanese Economy, M.E. Sharpe, Inc., vol. 13(4), pages 32-53, July.
  2. McLaren, John, 1999. "Supplier relations and the market context: A theory of handshakes," Journal of International Economics, Elsevier, vol. 48(1), pages 121-138, June.
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  11. Eric Maskin & John Moore, 1998. "Implementation and renegotiation," LSE Research Online Documents on Economics 19350, London School of Economics and Political Science, LSE Library.
  12. Banri Asanuma, 1985. "The Contractual Framework for Parts Supply in the Japanese Automotive Industry," Japanese Economy, M.E. Sharpe, Inc., vol. 13(4), pages 54-78, July.
  13. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
  14. Colombo, Ferdinando & Merzoni, Guido, 2006. "In praise of rigidity: The bright side of long-term contracts in repeated trust games," Journal of Economic Behavior & Organization, Elsevier, vol. 59(3), pages 349-373, March.
  15. Ferdinando Colombo & Guido Merzoni, 2008. "For how long to tie your hands? Stable relationships in an unstable environment," Journal of Economics, Springer, vol. 95(2), pages 93-120, November.
  16. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  17. Larry D. Qiu & Barbara J. Spencer, 2001. "Keiretsu and Relationship-Specific Investment: Implications for Market-Opening Trade Policy," NBER Working Papers 8279, National Bureau of Economic Research, Inc.
  18. Che, Y.K. & Hausch, D.B., 1997. "Cooperative Investments and the Value of Contracting," Working papers 9714, Wisconsin Madison - Social Systems.
  19. repec:oup:restud:v:66:y:1999:i:1:p:39-56 is not listed on IDEAS
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