The Empirics of Relational Contracts: The Good, the Bad, and the Ugly

Rocco Macchiavello ()
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Rocco Macchiavello: London School of Economics and Political Science

Chapter 24 in Handbook of New Institutional Economics, 2025, pp 597-620 from Springer

Abstract: Abstract This chapter reviews selected contributions within a recent body of empirical studies of relational contracts. Existing reviews have almost exclusively emphasized how relational contracts benefit participating parties: given parties’ inability to write complete contracts and courts’ inability to enforce those, relational contracting allows for the realization of gains from trade that would otherwise be foregone. This chapter argues that the empirical study of relational contracts should be extended to consider contexts in which such arrangements support undesirable transactions. After a brief discussion of approaches to empirically study relational contracts, this review thus considers three broad contexts of applications of relational contracts: the good, where relational contracts between firms provide a possibly constrained efficient governance form between the market and the firm; the bad, where relational contracts are used to sustain uncompetitive practices such as collusion; and finally, we sketch potential connections between studies of relational contracting and organized crime—the ugly.

Keywords: Relational contracts; Collusion; Organized crime (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-50810-3_24

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DOI: 10.1007/978-3-031-50810-3_24

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