We study how informal buyer-supplier relationships in the German automotive industry affect procurement. Using unique data from a survey focusing on these, we show that more trust, the belief that the trading partner acts to maintain the mutual relationship, is associated with both higher...

This paper studies the effect bargaining power has on self-enforcing contracts. Optimal contracts are characterized under three enforcement regimes. When enforcement is absent, I show that as the agent's bargaining power increases, her incentive payments decrease even though her total...

This article explores the economic role of the firm in a market economy. The analysis begins with a discussion and critique of the property rights approach to the theory of the firm as exposited in the recent work by Hart and Moore ('Property Rights and the Nature of the Firm'). It is argued...

The paper explores the economic role of the firm in a market economy. The analysis begins with a discussion and critique of the property rights approach to the theory of the firm as exposited in the recent work by Hart and Moore ("Property Rights and the Nature of the Firm"). It is argued that...

We model an organization as a hierarchy of managers erected on top of a technology (here consisting of a collection of plants). In our framework, the role of a manager is to take steps to reduce the adverse consequences of shocks that affect the plants beneath him. We argue that different...

We rely on transaction cost economics and the contingency stream of organization theory to answer two related questions. First, when contracting for complex services, do governments design contracts for flexibility? Second, is the contingency perspective relevant to understanding contract...