Relational Contracts and Trust in a High-Tech Industry

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

No 16653, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these ï¬ ndings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers.

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)
Date: 2021-10
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Related works:
Working Paper: Relational Contracts and Trust in a High-Tech Industry (2021)
Working Paper: Relational Contracts and Trust in a High-Tech Industry (2021)
Working Paper: Relational Contracts and Trust in a High-Tech Industry (2021)
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