349 results on '"relational contracts"'
Search Results
2. Great Expectations: The Moderating Effects of Supplier Service Model and Market Dynamics on Relational Contract Performance.
- Author
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Acocella, Angela, Caplice, Chris, and Sheffi, Yossi
- Subjects
RELATIONSHIP marketing ,MARKETING models ,SUPPLIERS ,TEMPTATION ,CONTRACTS - Abstract
Under a relational contract, the value placed on expected future business must outweigh the short-term temptations to deviate for the buyer–supplier relationship to persist. Operational and relational factors that influence this trade-off have been explored, however, there is a considerable lack of research on the moderating effects of supplier and market characteristics. We offer insights into how supplier service models and market dynamics impact suppliers' decisions to renege on the relational contract. Limited access to transactional and contractual data has restricted previous exploration. We overcome this limitation with a detailed dataset in the for-hire truckload transportation sector. We find that a third-party brokerage service model is better able to overcome operational demand challenges and maintain service due to lower capacity constraints and pooling effects as compared to asset-based providers. Furthermore, when the overall market is capacity-constrained, long-term relationships become less of a deterrent for suppliers to reject business. In addition, during tightly constrained markets, suppliers respond with higher rejection rates to short-term demand surges but not to historical demand variability. [ABSTRACT FROM AUTHOR]
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- 2024
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3. Robust relational contracts with subjective performance evaluation.
- Author
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Bhaskar, V., Olszewski, Wojciech, and Wiseman, Thomas
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EQUILIBRIUM ,WAGES ,CONTRACTS ,ANNOUNCEMENTS ,GAMES - Abstract
We study a repeated principal–agent model with transferable utility, where the principal's evaluation of the agent's performance is subjective. Our focus is on equilibria that are robust to the addition of small privately observed shocks to the payoffs. Existing constructions of positive‐effort equilibria are not robust to such payoff shocks. Allowing for simultaneous cheap‐talk announcements makes some effort sustainable in a robust equilibrium, and payoffs can be arbitrarily close to fully efficient ones if players are sufficiently patient. In contrast to the existing literature, our near‐efficient equilibria exhibit realistic features: the bonus size is reasonable, the threshold for being paid a bonus is nontrivial, and the base wage need not be negative. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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4. Social capital in transactions: The role of economic and social trust in the specialty beef production system in Brazil.
- Author
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Pereira, Jaiane Aparecida, Schiavi, Sandra Mara de Alencar, and Guimarães, Amanda Ferreira
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BEEF industry ,TRUST ,SOCIAL capital ,ECONOMIC uncertainty ,BEEF cattle - Abstract
This study aims to understand the social capital inherent in agents and the role of social and economic trust in transactions between beef cattle producers and slaughtering cooperatives in the specialty beef production system in Paraná state, Brazil. This qualitative research involved 31 semi-structured interviews with beef cattle producers, cooperatives, and key agents. Results revealed that social capital, comprising networks and informal norms, favors the condition of trust, enabling the construction of a hybrid governance structure under a complex institutional environment. Social and economic trust between agents facilitates transactions, reduces behavioral and market uncertainties, enables ex-post adaptations, and consequently, reduces monitoring costs and transaction costs. Trust based on social aspects, i.e., social trust, was more relevant for the construction of arrangements, while trust based on economic aspects, i.e., economic trust, had a greater impact on the continuity of arrangements. This reveals that looking at only one of them is not enough to understand contractual arrangements. Thus, this study highlights that unfolding the concept of trust and investigating whether it comes from an economic or social basis is important to understand the complexity of such arrangements, which may influence specialty beef production system design and coordination efficiency. [ABSTRACT FROM AUTHOR]
- Published
- 2024
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5. What does Covid-19 teach us about English contract law?
- Author
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Mitchell, Catherine
- Subjects
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COVID-19 pandemic , *CONTRACTS , *VIS major (Civil law) , *FRUSTRATION , *GOOD faith (Law) , *STAY-at-home orders , *GOVERNMENT regulation , *LEGAL precedent - Abstract
This paper examines how English courts have responded to the contract problems generated by the Covid-19 pandemic and considers what this tells us about future contract law development. In relation to consumers, the case law on pandemic-affected contracts, though limited, indicates that traditional contract doctrine does not necessarily produce beneficial outcomes for consumers. This further diminishes the importance of the common law in the consumer contracting context. In the commercial sector, contracting parties were encouraged by government and other organisations to co-operate with one another and act in good faith during the crisis, but this has not influenced the courts applying contract law in the pandemic aftermath. The emerging case law suggests that contract law has retained its commitment to certainty, freedom of contract and sanctity of contract, notwithstanding the extraordinary circumstances around the outbreak and its unpredictable effects on contracts. The unalloyed application of formal contract law in the post-pandemic case law augments the position of relational norms as extra-contractual in English law, putting the further judicial development of relational contract principles in doubt. The paper concludes that despite the considerable social and economic upheaval caused by the pandemic, its impact on contract law development is likely to be minimal. [ABSTRACT FROM AUTHOR]
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- 2024
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6. Market participation among smallholder farmers in Tanzania: determining the dimensionality and influence of psychological contracts
- Author
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Ismail, Ismail Juma
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- 2024
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7. Relational enforcement.
- Author
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Achim, Peter and Knoepfle, Jan
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AGENCY (Law) ,NONCOMPLIANCE ,FINES (Penalties) ,EQUILIBRIUM - Abstract
A principal incentivizes an agent to maintain compliance and to truthfully announce any breaches of compliance. Compliance is imperfectly controlled by the agent's private effort choices, is partially persistent, and is verifiable by the principal only through costly inspections. We show that in principal‐optimal equilibria, the principal enforces maximum compliance using deterministic inspections. Periodic inspection cycles are suspended during periods of self‐reported noncompliance, during which the agent is fined. We show how commitment to random inspections would benefit the principal, and discuss possible ways for the principal to overcome her commitment problem. [ABSTRACT FROM AUTHOR]
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- 2024
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8. Partnerships based on Joint Ownership.
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Blonski, Matthias and Herbold, Daniel
- Subjects
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TRANSACTION costs , *RENEGOTIATION , *PROPERTY rights - Abstract
In a unifying framework generalizing established theories we characterize under which conditions Joint Ownership of assets creates the best cooperation incentives in a partnership. We endogenise renegotiation costs and assume that they weakly increase with additional assets. A salient sufficient condition for optimal cooperation incentives among patient partners is if Joint Ownership is a Strict Coasian Institution for which transaction costs impede an efficient asset reallocation after a breakdown. In contrast to Halonen (2002) the logic behind our results is that Joint Ownership maximizes the value of the relationship and the costs of renegotiating ownership after a broken relationship. [ABSTRACT FROM AUTHOR]
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- 2024
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9. Solutions in Governance
- Author
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Boeger, Nina, author
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- 2024
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10. Key lessons learned from adopting relational principles in the public sector: a case study in california.
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Tillmann, Patricia Andre and Humphrey, Ken
- Subjects
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PUBLIC sector , *PROJECT management , *CONSTRUCTION industry , *EMPIRICAL research - Abstract
Alternative project delivery methods that support collaboration are gaining significant attention in the public sector in the U.S., with increasing examples of owners that transform their traditional delivery methods into ones that reflect relational contracting principles. These approaches are new and despite their proven benefits, their widespread is hindered by the novelty and unfamiliarity nature. The aim of this paper was to contribute to bridge this gap. The key elements associated with relational principles were drawn from the literature and discussed in the light of an empirical case in California. This successful case study provides evidence that these elements can work, even with the limitations commonly observed in the public sector. The paper discusses observed best practices and reveals some practical insights from a project team that was implementing relational elements in the public sector for the first time. The findings of this study will hopefully contribute to the widespread of these practices, and inspire academics and practitioners to initiate or continue their journey towards more collaborative project delivery methods in the construction industry. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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11. The client's struggle to control private military companies effectively.
- Author
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Daumann, Frank
- Subjects
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PRIVATE military companies , *MORAL hazard , *ARMED Forces , *INSTITUTIONAL economics , *SUPPLY & demand - Abstract
Private military companies (PMC) offer combat and training services and can have considerable advantages for the client on the one hand, but on the other hand it is hard for the client to exercise effective external governance. Using tools of New Institutional Economics, we analyse the relationship between the PMC and the client and show that effects like adverse selection, moral hazard and supply induced demand are detrimental to the client. We derive approaches from the theory to solve the identified problems. With the help of a comparative case study (Wagner Group in Syria and Gurkha Security Guards in Sierra Leone), the insights gained are tested and put into perspective. It turns out that there must be an effective military or economic threat potential in particular in order to achieve good behaviour on the part of the PMC. In this way, we expand the insights of successful monitoring private providers of military force from the client's point of view. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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12. Against the Spirit of the Age: The Rationale of Relational Contracts.
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Goodrich, Peter
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CONTRACTS ,GOOD faith (Law) ,CONTRACTS & ethics ,INTERPRETATION & construction of commercial law ,COMMERCIAL law - Abstract
In his long-awaited treatise on the relational theory of contracting, David Campbell provides a rigorous, systematic and consistently lucid account of mutual recognition as the basis of all volitional obligations. Fiercely negotiated economic transactions find their social expression in legally enforceable agreements that are to be followed scrupulously to the letter both by the parties and by the courts. This is because, in his view, mutual recognition, the co-operative economic enterprise, is memorialised in the legal instrument. Using the example of the emergent doctrine of good faith, this article argues that while such literalism proffers an admirably bright line for enforcement of agreements, it reduces the import and value of the relational theory of contract as an ethical and political accounting of market transactions. Literalism here is problematic not simply because of the inherent historicity and social diversity of language, but because in concepts such as good faith or reasonable interpretation, the purpose of the inscribed transaction has to be evaluated not only in terms of the plurality of the contract's clauses, but also with a view to the overall shared intent of the exchange. For the relational theory of contract to have the impact that it merits, it needs to strengthen its account of how mutual recognition and the ethical and political dimensions of relationship best gain expression in the good-faith interpretation of the proximities manifest in agreement. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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13. The Social Equilibrium of Relational Arrangements.
- Author
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Ghosh, Parikshit and Ray, Debraj
- Subjects
SOCIAL stability ,MORAL hazard ,PROBLEM solving ,TRUST ,SOCIAL norms - Abstract
The enforcement of relational contracts is especially challenging for anonymous environments in which new partnerships can be started after a transgression. Building on Ghosh and Ray (1996), we study bilateral partnership norms that exhibit gradually increasing cooperation, thereby deterring deviations. But such gradualism must be incentive-compatible for partners. We argue that incomplete information regarding partner patience solves this problem even though it further exacerbates the overall lack of information. Socially beneficial gradualism now becomes bilaterally desirable. We also study a version of our problem with one-sided moral hazard, and discuss analytical approaches to environments with richer gradations of incomplete information. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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14. Self-Enforcing Wage Contracts Redux.
- Author
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Thomas, Jonathan and Worrall, Tim
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CONTRACTS ,WAGES ,OPEN-ended questions ,RISK sharing - Abstract
This paper provides our reflections on self-enforcing wage contracts. We present a simple version of the model of Thomas and Worrall (1988) and explain its motivation, contribution, and methodology. We discuss some of its limitations, the development of literature, and its connection to the literature on relational contracting with an observable effort cost. We suggest some open questions for the future development of the literature. [ABSTRACT FROM AUTHOR]
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- 2023
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15. Revealing the Value of Relationships.
- Author
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Halac, Marina
- Subjects
BARGAINING power - Abstract
This paper studies optimal relational contracts when the value of the relationship between contracting parties is not commonly known. I examine a simplified, two-period version of the principal–agent model of Halac (2012), in which the principal has persistent private information about her outside option. The results capture the main lessons, showing why inefficiencies necessarily arise and how they depend on the parties’ bargaining powers. When parties care enough about the future, revealing the value of the relationship requires the informed principal to have bargaining power, and to sometimes renege on her promises. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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16. Relational Contracts: Reputation and Renegotiation.
- Author
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Pearce, David G. and Stacchetti, Ennio
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REPUTATION ,RENEGOTIATION ,CONTRACTS ,INFORMATION design - Abstract
This paper outlines some thoughts on relational contracts. Such a contract can involve an implicit agreement to behave in certain ways, that includes the use of explicit, legally enforceable contracts, which may be rewritten as play proceeds. The use of implicit contracts involves a series of challenges not encountered with a legal contract that irrevocably specifies all contingent behavior. What agreements are credible? What threatened punishments will withstand efforts to renegotiate? To what extent can a long-run player establish a reputation for a particular kind of behavior? Can information design and Bayesian persuasion usefully be viewed through this lens? [ABSTRACT FROM AUTHOR]
- Published
- 2023
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17. Relational Contracts: Recent Empirical Advancements and Open Questions.
- Author
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Macchiavello, Rocco and Morjaria, Ameet
- Subjects
CONTRACT theory ,OPEN-ended questions ,CONTRACTS ,ORGANIZATIONAL performance - Abstract
Relational contracts – informal self-enforcing agreements sustained by repeated interactions – are ubiquitous both within and across organizational boundaries. This review highlights recent empirical contributions in selected areas. We begin by reviewing some recent work that explicitly takes the dynamic enforcement constraints that underpin relational contract theory to the data. We then discuss the relationship between relational contracting and firms’ performance. We conclude by pointing in directions that we consider to be particularly ripe for future work. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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18. Making and Breaking Promises when their Costs Are Private Information.
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Jin Li and Matouschek, Niko
- Subjects
AGENCY (Law) ,INFORMATION asymmetry ,KNOWLEDGE transfer ,COST - Abstract
We discuss how to maintain trust when promise-makers are privately informed about the costs of keeping their promises and efficient transfers are not feasible. To this end, we present a simplified version of the model in Li and Matouschek (2013) in which a principal and an agent are in an infinitely repeated relationship. The agent’s effort and output are observable but not contractible and the principal is privately informed about the cost of paying the agent. We characterize the optimal relational contract, illustrate the methods used in solving games with one-sided asymmetric information and inefficient transfers, and discuss further applications. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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19. Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment: Thirty Years On.
- Author
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MacLeod, W. Bentley and Malcomson, James M.
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CONTRACT theory ,UNEMPLOYMENT ,CONTRACTS ,THEORY-practice relationship - Abstract
“Implicit Contracts, Incentive Compatibility, and Involuntary Unemployment” (MacLeod and Malcomson, 1989) remains our most highly cited work. We briefly review the development of this paper and of our subsequent related work, and conclude with reflections on the future of relational contract theory and practice. [ABSTRACT FROM AUTHOR]
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- 2023
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20. From Incentives to Control to Adaptation: Exploring Interactions between Formal and Relational Governance.
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Baker, George, Gibbons, Robert, and Murphy, Kevin J.
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AGENCY theory ,CORPORATE culture ,THEORY of the firm - Abstract
In 1991 we began to model interactions between formal and relational incentive contracts. We saw this work as agency theory. By the time the paper was published (BGM, 1994), we had begun to view the research agenda more broadly – with connections to organizational culture, the theory of firms’ boundaries, and more. Eventually, we built from this initial work, analyzing delegation within organizations as necessarily informal and moving beyond relational agency to structuring relationships (where parties choose their formal governance structure to facilitate their relational contract). In this essay we sketch theoretical, empirical, and methodological lessons we learned during this twenty-year journey [ABSTRACT FROM AUTHOR]
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- 2023
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21. Cooperation versus Competition between Agents in Relational Contracts.
- Author
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Kvaløy, Ola and Olsen, Trond E.
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CONTRACT employment ,RESEARCH questions ,CONTRACTS ,COOPERATION ,LABOR contracts - Abstract
How should firms provide incentives to a group of workers when performance measures are unverifiable? We provided some answers to this question in our paper “Team Incentives in Relational Employment Contracts” in 2006. Here we reflect upon the contribution of that paper and provide a further analysis of this research question. We propose a more applied theoretical framework and explore stochastic properties of performance variables, including correlations that make one agent’s performance informative about another agent’s effort. In this framework cooperative incentives tend to be preferable when performances are negatively correlated, while competitive incentives tend to prevail under positive correlation. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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22. Relational contracts and value chain governance: exporter approaches to overcoming transaction costs in Rwanda's coffee sector
- Author
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Gerard, Andrew, Lopez, Maria Claudia, Kerr, John, and Bizoza, Alfred R.
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- 2023
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23. Use of leader–member exchange theory to promote the project governance of construction project contractors
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Wang, Dedong and Chen, Xiaofei
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- 2023
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24. Building an Equilibrium: Rules vs. Principles in Relational Contracts.
- Author
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Gibbons, Robert, Grieder, Manuel, Herz, Holger, and Zehnder, Christian
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CONTRACTS ,ORGANIZATIONAL performance ,EQUILIBRIUM ,PROBLEM solving ,PRICES - Abstract
Effective collaboration within and between organizations requires efficient adaptation to unforeseen change. We study how parties build relational contracts that achieve this goal. We focus on the "clarity problem"—whether parties have a shared understanding of the promises they make to each other. Specifically, (a) a buyer and seller play a trading game in several periods; (b) they know their environment will change but do not know how; and (c) before any trading occurs, they can reach a nonbinding agreement about how to play the entire game. We hypothesize that pairs whose initial agreement defines a broad principle rather than a narrow rule are more successful in solving the clarity problem and in achieving efficient adaptation after unforeseen change. In our baseline condition, we indeed observe that pairs who articulate principles achieve significantly higher performance after change occurred. Underlying this correlation, we also find that pairs with principle-based agreements were more likely to both expect and take actions that were consistent with what their agreement prescribed. To investigate a causal link between principle-based agreements and performance, we implement a "nudge" intervention that induces more pairs to articulate principles. The intervention succeeds in coordinating more pairs on efficient quality immediately after the unforeseen change, but it fails to coordinate expectations on price, ultimately leading to conflicts and preventing an increase in long-run performance after the shock. Our results suggest that (1) principle-based agreements may improve organizational performance but (2) high-performing relational contracts may be difficult to build. History: This paper has been accepted for the Organization Science Special Issue on Experiments in Organizational Theory. Funding: We gratefully acknowledge financial support from the Massachusetts Institute of Technology Sloan School's Program on Innovation in Markets and Organizations. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2021.1503. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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25. Relational Voluntary Environmental Agreements with Unverifiable Emissions.
- Author
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Cesi, Berardino and D'Amato, Alessio
- Subjects
POLLUTION ,ENVIRONMENTAL regulations ,ENVIRONMENTAL economics ,ENVIRONMENTAL policy - Abstract
Environmental regulation and pollution control may clash against the presence of unverifiable tasks, like source-specific emissions. To tackle this issue, we reshape a voluntary agreement instrument, already available in the existing literature, from a dynamic perspective by means of a relational contracting approach. We define a Relational Voluntary Environmental Agreement (RVEA) in an N firms symmetric context, and show that even if emissions are not contractible across firms, and therefore enforcement cannot be delegated to a third party, if firms are sufficiently patient, a self-enforcing RVEA induces the achievement of the environmental objective. Finally, our welfare analysis reveals a notable result: our RVEA can imply less free riding and be welfare-improving with respect to a Voluntary Environmental Agreement enforced by a third party (along the lines of McEvoy, D. M., and J. K. Stranlund. 2010. "Costly Enforcement of Voluntary Environmental Agreements." Environmental and Resource Economics 47: 45–63). [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
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26. Reciprocity in Dynamic Employment Relationships.
- Author
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Fahn, Matthias
- Subjects
INDUSTRIAL relations ,RECIPROCITY (Psychology) ,RECIPROCITY (Commerce) ,BEHAVIORAL economics ,DECISION making ,LABOR market - Abstract
This paper analyzes a dynamic relational contract for employees with reciprocal preferences. A model of a long-term employment relationship is developed that implies that generous upfront wages activate the norm of reciprocity and then are more important when an employee is close to retirement. In earlier stages, direct incentives promising a bonus in exchange for effort are more effective. Hence, direct and reciprocity-based incentives reinforce each other and should be used in combination. Moreover, a more competitive labor market may increase the utilization of reciprocity-based incentives. This paper was accepted by Axel Ockenfels, behavioral economics and decision analysis. Funding: This work was supported by Hardegg'sche Stiftung, the Deutsche Forschungsgemeinschaft [CRC TRR 190], and the Austrian Science Fund [Grant P 33307-G]. Supplemental Material: The online appendices are available at https://doi.org/10.1287/mnsc.2022.4657. [ABSTRACT FROM AUTHOR]
- Published
- 2023
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27. Relational Contracting, Negotiation, and External Enforcement
- Author
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Watson, Joel, Miller, David A, and Olsen, Trond E
- Subjects
Relational contracts ,negotiation ,external enforcement ,Economics ,Commerce ,Management ,Tourism and Services - Abstract
We study relational contracting and renegotiation in environments with external enforcement of long-term contractual arrangements. A long-term contract governs the stage games that the contracting parties will play in the future (depending on verifiable stage-game outcomes) until they renegotiate. In a contractual equilibrium, the parties choose their individual actions rationally, jointly optimize when selecting a contract, and exercise their relative bargaining power. Our main result is that in a wide variety of settings, the optimal contract is semi-stationary, with stationary terms for all future periods but special terms for the current period. In each period the parties renegotiate to this same contract. For example, in a simple principal-agent model with a choice of costly monitoring technology, the optimal contract specifies mild monitoring for the current period but intense monitoring for future periods. Because the parties renegotiate in each new period, intense monitoring arises only off the equilibrium path after a failed renegotiation. (JEL C73, C78, D23, D86)
- Published
- 2020
28. Relational contract theory, the relevance of actual performance in contractual interpretation and its application to employment contracts in the United Kingdom and Australia.
- Author
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Gray, Anthony Davidson
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CONTRACT theory , *LABOR contracts , *LABOR laws , *LIBERTY of contract , *COMMON law , *JURISDICTION - Abstract
This article articulates a theory of relational contract, as an alternative to traditional freedom of contract philosophy. The law has moved away from freedom of contract to some extent, and it can be criticised on the basis of its unrealistic assumptions and detachment from the typical reality of parties' contracting. Relational contract theory is a possible suitable alternative theoretical framework. It may be useful in relation to contract interpretation. Specifically, it can be utilised to support a broader approach to contract interpretation, with the court focussing on the entirety of the parties' relations, including the written terms and also subsequent performance. It enjoys some support in the United Kingdom and in other common law jurisdictions. It can support the view taken by two justices of the High Court of Australia in a recent contract interpretation decision involving employment contracts. The article favours the approach taken by these justices, rather than that of the majority, whose judgment reflects classic contract law sentiments at odds with the general direction of contract law in comparative jurisdictions. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
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29. Lean in the Public Sector.
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Alarcón, Luis F.
- Subjects
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PUBLIC sector , *LEAN management , *SOCIOECONOMICS , *GROSS domestic product , *INDUSTRIAL productivity - Abstract
The Architectural, Engineering, and Construction Industry (AEC) is a critical socio-economic activity that is responsible for 8% of the GDP in the world, in parallel, it also is responsible for the generation of 100 million jobs worldwide. In this context, the generation of value is driven by the execution of capital projects. Nonetheless, despite its importance, the sector's productivity historically is behind other industries, and poor performance of projects is often the norm rather than the exception. The running of projects in the Public Sector is not immune to these issues. An effective strategy to address this condition is the use of the Lean approach. Thus, this special issue of the Revista de Ingeniería de Construcción is focused on providing insight into the application of Lean in the Public Sector (LIPS). Articles evidencing the results of LIPS in the United States, UK, Finland, and Chile are presented as part of this effort. Following this premise, the authors who contribute to this special issue have provided an inspiring insight into the use of LIPS around the world evidencing the potential of its outcomes. Despite the progress and the encouraging results, much work is still required to widespread the benefits of this approach. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
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30. A brief history of lean in the public sector.
- Author
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Ballard, Glenn
- Subjects
- *
PUBLIC sector , *LEAN management , *CONSTRUCTION laws , *CORPORATE governance , *HEALTH care industry - Abstract
The development of Lean principles within the public sector began in 2003 following Lean Construction Institute's developing efforts on relational contracting. Later, challenges and opportunities for implementing Lean were identified in Californian construction law. Collaborations with entities like the California Department of Transportation and the University of California San Francisco showcased Lean's benefits, leading to legislative changes allowing broader implementation across the University of California system. Healthcare also saw streamlined processes through collaborations, in this case, between the P2SL, the Office of Statewide Health Planning and Development, and major healthcare companies, reducing project durations significantly. International expansion in 2009 led to successful Lean pilot projects in Germany and Finland. Inspired by Washington State's Lean governance practices, Lean in Public Sector Construction (LIPS) expanded its focus beyond construction. LIPS has conducted impactful global conferences, highlighting Lean's transformative role in reshaping diverse public sector operations and governance worldwide. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
- View/download PDF
31. Relational Contracts: Public versus Private Savings.
- Author
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Dilmé, Francesc and Garrett, Daniel F.
- Subjects
LABOR contracts ,MONETARY incentives ,LABOR incentives ,EMPLOYEE motivation ,MONOPOLIES - Abstract
Work on relational employment agreements often predicts low payments or termination for poor performance. The possibility of saving can, however, limit the effectiveness of monetary incentives in motivating an employee with diminishing marginal utility for consumption. We study the role of savings and their observability in optimal relational contracts. We focus on the case where players are not too patient, and hence the constant first‐best effort cannot be implemented. If savings are hidden, the relationship eventually deteriorates over time. In particular, both payments and effort decline. On the other hand, if savings are public, consumption is initially high, so the agent's savings fall over time, and effort and payments to the agent increase. The findings thus suggest how tacit agreements on consumption can forestall the deterioration of dynamic relationships in which the agent can save. [ABSTRACT FROM AUTHOR]
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- 2023
- Full Text
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32. Balanced Scorecards: A Relational Contract Approach.
- Author
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KVALØY, OLA and OLSEN, TROND E.
- Subjects
JOB performance ,LABOR productivity ,WAGES ,BALANCED scorecard ,LABOR contracts ,HUMAN multitasking - Abstract
Reward systems based on balanced scorecards often connect pay to an index, that is, a weighted sum of multiple performance measures. We show that such an index contract may indeed be optimal if performance measures are nonverifiable so that the contracting parties must rely on self‐enforcement. Under commonly invoked assumptions (including normally distributed measurements), we show that the weights in the index reflect a tradeoff between distortion and precision for the measures. The efficiency of the contract improves with higher precision of the index measure, because this strengthens incentives, and correlations between measurements may for this reason be beneficial. There is a caveat, however, because the index contract is not necessarily optimal for very precise measurements, although it is shown to be asymptotically optimal. We also consider hybrid measurements, and show that the principal may want to include verifiable performance measures in the relational index contract in order to improve incentives, and that this has noteworthy implications for the formal contract. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
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33. Commitment and discretion in contracts: theory and evidence from retirement plans.
- Author
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Kim, Jin‐Hyuk and Vikander, Nick
- Subjects
CONTRACT theory ,PENSIONS ,RETIREMENT planning ,EMPLOYEE ownership ,DISCRETION ,STOCK ownership - Abstract
We consider a firm's problem of incentivizing its workforce through relational contracts, when workers effectively face a shorter time horizon due to possible separation shocks. Commitment issues then generate a trade‐off between efficiency and distribution, which affects both performance and profits. Profits under relational contracting can exceed those under formal contracting, despite lower performance, when discounting is moderate, firm bargaining power is weak, and shocks are likely. Using a matched employer–retirement plan dataset, and interpreting discretionary profit‐sharing plans and employee stock ownership plans as relational and formal contracting, respectively, we find some support for our predictions. [ABSTRACT FROM AUTHOR]
- Published
- 2023
- Full Text
- View/download PDF
34. Leaders' trait signaling effect on followers' psychological contract dynamics
- Author
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Ishaq, Erum, Raja, Usman, Bouckenooghe, Dave, and Bashir, Sajid
- Published
- 2022
- Full Text
- View/download PDF
35. Market conditions and firm morality: Employee trust in the honesty of their managers.
- Author
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Liu, Dan, Meagher, Kieron J., and Wait, Andrew
- Subjects
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TRUST , *PERSONNEL management , *HONESTY , *ETHICS , *BUSINESS enterprises - Abstract
Using establishment-level count data, we investigate the relationship between employee trust of their managers and both: (i) product-market conditions; and (ii) the observability of manager's actions within the firm. When demand is expanding (contracting), average employee trust of their managers is higher (lower): negative shocks or downturns make it more difficult to keep past promises and reduce trust. Greater product-market competition is associated with higher employee trust of managers. Rather than being a race-to-the-bottom, competition appears to induce managers to be more trustworthy as they seek to access productive trust-based equilibria with their employees. Consistent with the prediction that a trust-based equilibrium is more difficult to sustain with imperfect observability, employees trust management less in larger establishments, in larger firms and when an establishment is not the headquarters of the organization. [ABSTRACT FROM AUTHOR]
- Published
- 2022
- Full Text
- View/download PDF
36. Psychological Contract Research in Accounting Literature
- Author
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Young, Kristie M., Stammerjohan, William W., Bennett, Rebecca J., and Drake, Andrea R.
- Published
- 2021
- Full Text
- View/download PDF
37. Governance and Societal Normativity
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Wieland, Josef, Biggiero, Lucio, Series Editor, de Jongh, Derick, Series Editor, Priddat, Birger P., Series Editor, Wieland, Josef, Series Editor, and Zicari, Adrian, Series Editor
- Published
- 2020
- Full Text
- View/download PDF
38. Relational Contracts and Goods
- Author
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Wieland, Josef, Biggiero, Lucio, Series Editor, de Jongh, Derick, Series Editor, Priddat, Birger P., Series Editor, Wieland, Josef, Series Editor, and Zicari, Adrian, Series Editor
- Published
- 2020
- Full Text
- View/download PDF
39. Morale and Debt Dynamics.
- Author
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Barron, Daniel, Li, Jin, and Zator, Michał
- Subjects
FINANCIAL leverage ,MORALE ,BUSINESS planning ,DEBT ,WAGE increases ,EMPLOYEE morale ,MINIMUM wage ,PROFIT maximization - Abstract
This paper shows that debt undermines relational incentives and harms worker morale. We build a dynamic model of a manager who uses limited financial resources to simultaneously repay a creditor and motivate a worker. If the manager can divert or misuse revenue, then debt makes the manager less willing to follow through on promised rewards, leading to low worker effort. In profit-maximizing equilibria, the firm prioritizes repaying its debts, leading to gradual increases in effort and wages. These dynamics can persist even after debts have been fully repaid. Consistent with this analysis, we document that a firm's financial leverage is negatively related to measures of employee morale, wages, and productivity. This paper was accepted by Joshua Gans, business strategy. [ABSTRACT FROM AUTHOR]
- Published
- 2022
- Full Text
- View/download PDF
40. Transparency in relational contracts.
- Author
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Fahn, Matthias and Zanarone, Giorgio
- Subjects
ORGANIZATIONAL transparency ,CORPORATE governance ,MATERIAL accountability ,VALUE creation ,PROFITABILITY ,ORGANIZATIONAL performance - Abstract
Research Summary: We model how an organization's transparency (toward employees or contractors) affects its ability to sustain relational governance. We show that transparency creates accountability: if the organization reneges on promises made to an agent, the other agents observe its defection and quit. Thus, transparency enables organizations with limited credibility to provide high‐powered incentives. However, transparency also triggers envious social comparisons that reduce profits and may erode its credibility benefit. In that case, the organization may find it optimal to appropriate a smaller share of a larger pie—that is, to elicit high effort from the envious agents by leaving them a rent. Social comparisons therefore create a tension between value creation and profitability, which may call for "sunshine laws" that force the organization to be transparent. Managerial Summary: Organizational transparency (in pay and performance reviews) is often advocated but rarely used. Our paper provides a theoretical framework to evaluate the benefits and costs of transparency for organizations. Our model shows that transparent organizations are more accountable to their employees and partners, and hence more credible and trustworthy. At the same time, transparency triggers envious social comparisons among employees, which may reduce organizations' ability to capture value to the advantage of those employees. A managerial implication of our analysis, supported by preliminary evidence presented in the paper, is that organizations that aim to increase their employees' and contractors' trust benefit the most from transparency. A policy implication is that "sunshine laws" that impose transparency may enhance organizations' productivity, output, and value creation. [ABSTRACT FROM AUTHOR]
- Published
- 2022
- Full Text
- View/download PDF
41. Introduction to the Oliver E. Williamson memorial issue.
- Author
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Langlois, Richard N.
- Subjects
NOBEL Prize in Economics ,SOCIAL scientists ,INSTITUTIONAL economics ,NOBEL Prize winners - Abstract
Oliver E. Williamson, who died on May 21, 2020 at the age of 87, was one of the most influential social scientists of modern times. In 2009, he was co-recipient of the Nobel Prize in Economics. As of mid-October 2021, he had been cited an astonishing 317,838 times according to Google Scholar. His measured influence outdistances that of even his fellow Nobel Laureates Elinor Ostrom (230,667), Douglass C. North (187,577) and Ronald H. Coase (123,686). This special issue of the Journal of Institutional Economics brings together a distinguished roster of scholars to remember Williamson, to elucidate some of his key ideas and influences, and to extend the reach of his ideas to new arenas. [ABSTRACT FROM AUTHOR]
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- 2022
- Full Text
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42. Relationships Under Stress: Relational Outsourcing in the U.S. Airline Industry After the 2008 Financial Crisis.
- Author
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Gil, Ricard, Kim, Myongjin, and Zanarone, Giorgio
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GLOBAL Financial Crisis, 2008-2009 ,AIRLINE industry ,CONTRACTING out ,REGIONAL airlines - Abstract
This paper studies how firms restructure their relational contracts in the face of permanent shocks to the value of their relationships. In the context of the U.S. airline industry, we argue that major carriers enter self-enforcing agreements with their outsourced regional partners because a key aspect of airline operations—the exchange of landing slots under adverse weather—is formally noncontractible. We show empirically that major and regional airlines did not terminate their relational contracts after the 2008 crisis but rather, restructured the scope of such contracts in a way that restored their credibility. In particular, we show that a major airline was less likely to continue outsourcing a route to a regional partner after the 2008 crisis the lower the present discounted value of their preexisting relationship and hence, the larger the negative effect of the crisis on the relational contract's "self-enforcing range." This paper was accepted by Joshua Gans, business strategy. [ABSTRACT FROM AUTHOR]
- Published
- 2022
- Full Text
- View/download PDF
43. Putting relational contract theory to the test: experimental evidence.
- Author
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Erkal, Nisvan, Wu, Steven Y., and Roe, Brian E.
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CONTRACT theory ,EXPERIMENTAL design - Abstract
We investigate a number of canonical predictions that arise from relational contract theory. Employing an experimental design with endogenous choice of contract type, we find considerable experimental support for several well-established predictions, including the importance of self-enforcement and individual rationality constraints for contractual performance; a preference for informal agreements when third-party verification of performance is coarse; and a tendency toward strategic ambiguity (Bernheim and Whinston Am Econ Rev 88(4):902–932, 1998). However, two findings that appear to be inconsistent with theory are that (1) contractually specified performance levels do not appear to respond to the discount factor though realized performance does; and (2) subjects often apply inefficient punishments following a deviation. By providing evidence on the strengths and weaknesses of standard relational contract theory, our study shows where there is room for improvement. We conjecture that incorporating social preferences and semi-grim strategies (Breitmoser Am Econ Rev 105(9):2882–2910, 2015) can potentially address the observed weaknesses. [ABSTRACT FROM AUTHOR]
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- 2022
- Full Text
- View/download PDF
44. Good Faith and Relational Contracts: A Scots-Roman Perspective.
- Author
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Ainslie, Jonathan
- Subjects
- *
COMMON law , *GOOD faith (Law) , *CONTRACTS , *JURISDICTION ,SCOTTISH law - Abstract
One of the most striking differences between the Civilian jurisdictions and the English common law has been the reluctance of the latter to adopt a general principle of good faith in contract. Scots law, however, often seeks to exercise the functions of good faith but does not recognise it as a general principle. In recent years, English law has begun to identify good faith as an implied term in "relational contracts", a concept with sociological and economic origins. This article applies that development to Scotland by exploring the relationship between good faith and the relational contract from a Scots-Roman perspective. It will be shown that the historical sources of Scots contract law, from the Roman reception to the Institutional Writers, are fully compatible with relational contracts. It goes on to consider how a Scots law approach to good faith in relational contracts might orientate itself to the English authorities. [ABSTRACT FROM AUTHOR]
- Published
- 2022
- Full Text
- View/download PDF
45. VALUE CREATION AND DISTRIBUTION IN THE SPECIALTY COFFEE CHAIN: A STUDY OF THE RELATIONSHIP BETWEEN AGENTS IN PARANÁ, BRAZIL AND EUROPE.
- Author
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Ferreira Guimarães, Amanda, de Alencar Schiavi, Sandra Mara, Machado Bouroullec, Melise Dantas, and Aparecida Pereira, Jaiane
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GLOBAL value chains ,VALUE creation ,SUSTAINABILITY ,VALUE chains ,COFFEE - Abstract
Copyright of Organizações Rurais & Agroindustriais is the property of Organizacoes Rurais & Agroindustriais and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)
- Published
- 2022
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46. Worker-firm relational contracts in the time of shutdowns: experimental evidence.
- Author
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Linardi, Sera and Camerer, Colin
- Subjects
COVID-19 pandemic ,LABOR demand ,GOVERNMENT shutdown ,LAYOFFS ,CONTRACTS ,RECIPROCITY (Psychology) - Abstract
Exogeneous disruptions in labor demand have become more frequent in recent times. The COVID-19 pandemic has resulted in millions of workers being repeatedly laid off and rehired according to local public health conditions. This may be bad news for market efficiency. Typical employment relations—which resemble non-enforceable (implicit) contracts—rely on reciprocity (Brown et al. in Econometrica 72:747–780, 2004), and hence could be harmed when workers' efforts no longer guarantee reemployment in the next period. In this paper we extend the BFF paradigm to include a per-period probability (0%, 10%, 50%) of publicly observable "shutdown", where a specific firm cannot contract with any workers for several periods. A Perfect Bayesian Equilibrium exists in which these shutdowns destabilize relationships, but do not harm efficiency. Our experiment shows that, remarkably, market efficiency can be maintained even with very frequent stochastic shutdowns. However, the dynamic of relational contracts changes from one where a worker finds stable employment to one where she juggles multiple employers, laying the burden of maintaining productivity upon workers and worsening worker-side inequality. [ABSTRACT FROM AUTHOR]
- Published
- 2021
- Full Text
- View/download PDF
47. Relational Contracts in Competitive Labour Markets
- Author
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Board, Simon and Meyer-Ter-Vehn, Moritz
- Subjects
Economics ,Applied Economics ,Econometrics ,Economic Theory ,On-the-job search ,Relational contracts ,Matching ,Efficiency wages ,Wage dispersion ,Productivity dispersion ,Applied economics ,Economic theory - Abstract
We analyze a large, anonymous labour market in which firms motivate their workers via relational contracts. The market is frictionless and features on-the-job search, in that all acceptable vacancies are immediately filled and the employed compete with the unemployed for vacancies. While firms and workers are ex ante identical, the unique equilibrium exhibits a continuous distribution of contracts in which high wage firms have higher retention rates, more motivated workers and higher productivity. The model thus generates dispersion in wages, productivity and human resource strategies, and gives rise to endogenous job ladders. An exogenous increase in on-the-job search increases the quantity of jobs but decreases their quality; with sufficient on-the-job search there is full employment, and wage dispersion rather than unemployment motivates workers.
- Published
- 2015
48. Good faith in franchising : The perceptions of franchisees, franchisors and their lawyers in the French context
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Perrigot, Rozenn, Terry, Andrew, and Lernia, Cary Di
- Published
- 2019
- Full Text
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49. Renegotiation of long‐term contracts as part of an implicit agreement.
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NASH equilibrium ,RENEGOTIATION ,CONTRACTS ,LIMITED liability ,PATIENCE - Abstract
I study a repeated principal–agent game with long‐term output contracts that can be renegotiated at will. Actions are observable but not contractible, so they can only be incentivized through implicit agreements formed in equilibrium. I show that contract renegotiation is a powerful tool for incentive provision, despite the stationarity of the environment. Continuation contracts are designed to punish deviations in noncontractible behavior. If the equilibrium actions are observed, these contracts are renegotiated away. This form of anticipated renegotiation results in welfare improvements over outcomes attainable by one‐period contracts or by long‐term contracts that are not renegotiated. When the principal is not protected by limited liability, first‐best outcomes are attainable regardless of the impatience of the players. Equilibrium strategies are shown to satisfy various concepts of renegotiation‐proofness. [ABSTRACT FROM AUTHOR]
- Published
- 2021
- Full Text
- View/download PDF
50. Relational communication.
- Author
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Kolotilin, Anton and Li, Hongyi
- Subjects
STRATEGIC communication ,DECISION making - Abstract
We study a communication game between an informed sender and an uninformed receiver with repeated interactions and voluntary transfers. Transfers motivate the receiver's decision‐making and signal the sender's information. Although full separation can always be supported in equilibrium, partial or complete pooling is optimal if the receiver's decision‐making is highly responsive to information. In this case, the receiver's decision‐making is disciplined by pooling states where she is most tempted to defect. [ABSTRACT FROM AUTHOR]
- Published
- 2021
- Full Text
- View/download PDF
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