Trust in Vertical Relations

Giacomo Calzolari, Leonardo Felli, Johannes Koenen, Giancarlo Spagnolo and Konrad Stahl ()

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: Using data from a unique survey on all buyers and crtical suppliers in German automotive production, we explore the role of trust in long-term procurement relationships. Higher trust leads to higher quality of the automotive parts, and to more competition among suppliers. These effects are significant for low-tech parts only, and not for high tech ones, even when the buyer procures parts from the same supplier. We rationalize these unexpected findings within a relational contracting model, where technology-specific differences in the cost of switching suppliers determine the bargaining power in part-specific procurement relationships.

Keywords: Relational Contracts; Hold-up; Buyer-Supplier Contracts; Bargaining Power (search for similar items in EconPapers)
JEL-codes: D86 L14 L62 O34 (search for similar items in EconPapers)
Pages: 65
Date: 2024-04
New Economics Papers: this item is included in nep-com, nep-cta, nep-ind, nep-inv and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:bon:boncrc:crctr224_2024_530

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