Firms, Courts, and Reputation Mechanisms: Towards a Positive Theory of Private Ordering

Richman, Barak D.

doi:10.2307/4099361

Cited by 97 publications

(56 citation statements)

References 1 publication

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“…The reputation mechanism works well in small groups, where low information costs and cultural homogeneity encourage retaliation and black-listing, with a real risk of losing future business. Indeed, the enforcement of commercial agreements in merchant communities has been extensively studied (for a survey see Richman 2004). …”

Section: Governance Structuresmentioning

confidence: 99%

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

Codron

Étienne

Rousset

2013

Journal on Chain and Network Science

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Sourcing grapes from independent growers for use in top quality wines sold on the international market is a major organisational challenge for corporate wineries. Our paper adds to the small existing literature addressing these coordination issues in the New World wine sector, by going deeper into the specifics of the contracts, as well as the "transaction cost economising" argument. Based on a case-study carried out in the Argentine province of Mendoza, this article presents an in-depth analysis of the technical process, in order to identify the contractual hazards posed by asset specificity, measurement costs, and non-contractible actions. Drawing on contract completion and dual sourcing literature, it analyses the contractual and non contractual mechanisms (price incentives, grower monitoring, allocation of decision rights to the winery, role of backward integration into production) used to govern such grape transactions. Through our analysis, we were able to arrive at four main conclusions. Firstly, most agreements are still verbal, with the exception of occasional written contracts, limited to a few legal provisions. It became clear to us that this approach to forging agreements is not always adequate in managing the inherently complex interactions between grape varieties, soil, farming practices and wine-making processes in high-end wine production. Secondly, extensive decision rights are allocated to wineries, to deal with incompleteness. These are key decisions to be taken during the cropping and harvesting process. Thirdly, pricing is generally kept flexible, with grape prices negotiated ex-post. This means that trade imbalances tend to be resolved in the long term. Winegrowers also benefit from financial rewards to compensate for allocations. Finally, any potential opportunistic behaviour by wineries with regards to asset specificity (in particular yield limitation) and allocation of rights is kept at bay by mechanisms such as winery reputations and credit third-party guaranty. This type of behaviour by growers is similarly deterred through monitoring and vineyard ownership on the part of the wineries.

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Section: Governance Structuresmentioning

confidence: 99%

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

Codron

Étienne

Rousset

2013

Journal on Chain and Network Science

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“…Even though many merchants remain 73. For a more formal model predicting when the limitations of public courts will induce merchants to pursue private ordering, see Richman (2004).…”

Section: Discussionmentioning

confidence: 99%

How Communities Create Economic Advantage: Jewish Diamond Merchants in New York

Richman

2005

SSRN Journal

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“…Over the past decade, American jurists (see Richman 2004) (Richman 2006), of the American cotton trade on the Memphis Cotton Exchange (Bernstein 2001), and dispute resolution among farmers in Shasta County (Ellickson 1991). The focus of these studies is thus not global or transnational but local and occupation-specific.…”

Section: A) Non-state Self-regulation In Micro-societies or Governancmentioning

confidence: 99%

“…It is that of Jewish diamond merchants in the New York Diamond Dealers Club (DDC), who trade in accordance with rules they set themselves under the aegis of the Club, which provides regular information about the business practices of its members, thus influencing their reputation and -in the event of repeated and significant loss of reputation -threatening them with expulsion. Barak D. Richman writes of "reputation-based enforcement" (Richman 2004(Richman , p. 2328) of the self-given rules, what can be called governance by reputation. To put it simply, such a mode of governance presupposes two things: a functioning exchange of information about the business practices of certain people (mostly merchants) and the existence of a social group or a social network for which the reputation of its members is important; we shall call such social groups reputation communities.…”

Section: A) Non-state Self-regulation In Micro-societies or Governancmentioning

confidence: 99%

The World of Rules. A Somewhat Different Measurement of the World

Schuppert¹

2017

Global Perspectives on Legal History

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Firms, Courts, and Reputation Mechanisms: Towards a Positive Theory of Private Ordering

Cited by 97 publications

References 1 publication

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

Quality management and contractual incompleteness: grape procurement for high-end wines in Argentina

How Communities Create Economic Advantage: Jewish Diamond Merchants in New York

The World of Rules. A Somewhat Different Measurement of the World

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