Competition and Trust: Evidence from German Car Manufacturers

Konrad Stahl, Leonardo Felli and Johannes Koenen ()

No 8265, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyer trust, that higher levels of trust mitigate relationship-specific underinvestment in a classical hold-up situation. Moreover, contrary to the extant literature, we show that higher levels of supplier's trust are reflected in the buyer's choice of a more competitive procurement strategy among potential suppliers.

Keywords: Car manufacturers; Competition; German automotive industry; Hold-up problem; Specific investment; Suppliers; Trust (search for similar items in EconPapers)
JEL-codes: D22 D86 L22 L62 (search for similar items in EconPapers)
Date: 2011-02
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Citations: View citations in EconPapers (6)

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Working Paper: Competition and Trust: Evidence from German Car Manufacturers (2011)
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