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Do we need handshakes to cooperate in buyer-supplier relationships?

José de Sousa () and Xavier Fairise ()

No 10-13, Working Papers SMART - LERECO from INRA UMR SMART-LERECO

Abstract: Does formal contracting foster cooperation in a buyer-supplier relationship? In line with the literature, we find that a renegotiable contract with relationship-specific joint investments does not make it possible to reach the first-best. However, we show that a renegotiable contract may induce more cooperation than an informal arrangement. This result may help to understand how cooperation emerges in Japanese procurement practices, which typically involve relationship-specific joint investments and renegotiable contracts.

Keywords: Incomplete contracts; relationship-specific investments; cooperation (search for similar items in EconPapers)
JEL-codes: K12 L22 C7 (search for similar items in EconPapers)
Date: 2010
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Working Paper: Do we need handshakes to cooperate in buyer-supplier relationships? (2010) Downloads
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