IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Renegotiation, Learning and Relational Contracting

  • Gil, Ricard

This paper empirically examines contract renegotiation and learning in the movie industry under long-term business relationships. The paper develops a theory of renegotiation and learning with incomplete contracts. This theory shows how renegotiation as an ex-post mechanism to adjust participation constraints, together with learning, allows agents to maximize the value of the contractual relationship in the presence of incomplete contracts and long term relationships. The theory defines clear testable implications that I test in the paper. For this purpose, I use a new dataset of revenuesharing contracts and renegotiation outcomes in the Spanish movie industry. I find that movies that perform overall below expectations are renegotiated 20% more often. I find as well that movies are 6 to 8% more likely to be renegotiated in theaters where movie revenues are below the movie average revenues. Following this, I find evidence that economic agents learn across periods about the real movie audience appeal and use the new information to adjust their beliefs and make daily decisions. Finally, I conclude that contractual incompleteness is optimal in this case as long as learning allows firms to cut movie runs optimally.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2005-14.

in new window

Length: 25, [14] p.
Date of creation: Mar 2006
Date of revision:
Handle: RePEc:hit:hitcei:2005-14
Contact details of provider: Postal: 2-1 Naka, Kunitachi, Tokyo 186-8603
Phone: 042-580-8405
Fax: 042-580-8333
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hit:hitcei:2005-14. 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: (Reiko Suzuki)

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.