The Quasi-Judicial Role of Large Retailers: An Efficiency Hypothesis of Their Relation with Suppliers

Benito Arruñada ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: The paper explores an efficiency hypothesis regarding the contractual process between large retailers, such as Wal-Mart and Carrefour, and their suppliers. The empirical evidence presented supports the idea that large retailers play a quasi-judicial role, acting as "courts of first instance" in their relationships with suppliers. In this role, large retailers adjust the terms of trade to on-going changes and sanction performance failures, sometimes delaying payments. A potential abuse of their position is limited by the need for re-contracting and preserving their reputations. Suppliers renew their confidence in their retailers on a yearly basis, through writing new contracts. This renovation contradicts the alternative hypothesis that suppliers are expropriated by large retailers as a consequence of specific investments.

Keywords: Retailing; distribution; contracts; transaction costs; self-enforcement (search for similar items in EconPapers)
JEL-codes: L14 L22 L81 K12 M31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law
Date: 2000-01
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Persistent link: http://EconPapers.repec.org/RePEc:upf:upfgen:445

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