Do we need handshakes to cooperate in buyer-supplier relationships?

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. This result may help to understand how cooperation emerges in Japanese procurement practices, which typically involve relationship-specific joint investments and renegotiable contracts.


Issue Date:
2010
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/210389
Total Pages:
35
JEL Codes:
K12; L22; C7
Series Statement:
10-13




 Record created 2017-04-01, last modified 2017-08-28

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