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

Author

Listed:
  • José de Sousa

    (LEMMA - Laboratoire d'économie mathématique et de microéconomie appliquée - Université Paris-Panthéon-Assas)

  • Xavier Fairise

    (GAINS - ARGUMANS - Atelier De Recherche En Gestion De L'université Du Mans - GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux - UM - Le Mans Université)

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 can. 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

  • José de Sousa & Xavier Fairise, 2013. "On the value of partial commitment for cooperative investment in buyer–supplier relationship," Post-Print hal-04329719, HAL.
    • Handle: RePEc:hal:journl:hal-04329719
    DOI: 10.1007/s00712-013-0360-6
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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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