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

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  • Jose De Sousa
  • Xavier Fairise

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. Copyright Springer-Verlag Wien 2014
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jose De Sousa & Xavier Fairise, 2013. "On the value of partial commitment for cooperative investment in buyer-supplier relationship," TEPP Working Paper 2013-08, TEPP.
    • Handle: RePEc:tep:teppwp:wp13-08
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    References listed on IDEAS

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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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