Almost Anonymous Implicit Contracting

Paul Castañeda Dower and Andrei Bremzen

No w0187, Working Papers from Center for Economic and Financial Research (CEFIR)

Abstract: Economists use relational or reputational concerns to explain the implicit enforcement of contracts. Both mechanisms require special assumptions concerning contracting parties' identities; in particular, these assumptions would not hold in one-period settings in which outcomes cannot affect reputation. In such a setting, this paper shows how a signaling mechanism can support the implicit enforcement of contracts that Pareto improve upon the null contract. Furthermore, this mechanism is independent of the discount factor and can outperform the relational contract in a range of cases. We find empirical support for our theory using contracts from nancing alliances in the biotech industry.

Keywords: Implicit contracts; biotech alliances; identity (search for similar items in EconPapers)
JEL-codes: D29 L24 O31 (search for similar items in EconPapers)
Pages: 52 pages
Date: 2012-09
New Economics Papers: this item is included in nep-cta, nep-ino and nep-mic
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http://www.cefir.ru/papers/WP187.pdf (application/pdf)

Related works:
Working Paper: Almost Anonymous Implicit Contracting (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cfr:cefirw:w0187

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