Relational Adaptation Under Reel Authority

Daniel Barron (), Robert Gibbons, Ricard Gil and Kevin J.Murphy ()
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Daniel Barron: Kellogg School of Management, Northwestern University, Evanston, Illinois 60208;
Kevin J.Murphy: USC Marshall School of Business, University of Southern California, Los Angeles, California 90089

Management Science, 2020, vol. 66, issue 5, 1868-1889

Abstract: We study relationships between parties who have different preferences about how to tailor decisions to changing circumstances. Our model suggests that relational contracts supported by formal contracts may achieve relational adaptation that improves on adaptation decisions achieved by formal or relational contracts alone. Our empirics consider revenue-sharing contracts between movie distributors and an exhibitor. The exhibitor has discretion about whether and when to show a movie, and the parties frequently renegotiate formal contracts after a movie has finished its run. We document that such ex post renegotiation is consistent with the distributor rewarding the exhibitor for adaptation decisions that improve their joint payoffs.

Keywords: adaptation; renegotiation; relational contracts (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormnsc:v:66:y:2020:i:5:p:1868-1889

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