Trust, Investment and Competition: Theory and Evidence from German Car Manufacturers

Calzolari, Giacomo; Felli, Leonardo; Koenen, Johannes; Spagnolo, Giancarlo; Stahl, Konrad

doi:10.2139/ssrn.3422263

SSRN Journal

2019

DOI: 10.2139/ssrn.3422263

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Trust, Investment and Competition: Theory and Evidence from German Car Manufacturers

Giacomo Calzolari¹,

Leonardo Felli²,

Johannes Koenen³

et al.

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2020

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Cited by 2 publications

References 29 publications

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Precontractual investment and modes of procurement

Chiara

2020

European Economic Review

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We study a repeated game in which a buyer must decide whether to procure goods whose design may turn out to be defective through auctions or negotiations. To reduce the likelihood of failure, the buyer must motivate the potential suppliers to make an investment before the contract is signed. As the noisy signal of the supplier's investment is non-verifiable, the buyer can induce the suppliers to invest only through relational contracts, that is informal agreements sustained by the parties' concern about the future. We find that auctions may not enable the buyer to implement a surplus-increasing relational contract even when the players are very patient. Therefore, negotiations may be adopted since they are more effective in stimulating the supplier's investment. We also show how the possibility of inducing the supplier's investment as well as the choice of the procurement mode affect the buyer's initial specification of the good. Moreover, we find that relational contracting may be valuable even when a design failure can be verified by a court. Finally, we highlight how our model is able to reconcile several real-world procurement practices.

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Precontractual investment and modes of procurement

Chiara

2020

European Economic Review

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On Multitasking and Job Design in Relational Contracts*

Ishihara

2020

The J Industrial Economics

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We investigate job design problems in relational contracting environments with multitasking and an aggregated and distorted performance measurement. Compared to assigning all the tasks to a single agent, assigning the tasks to multiple agents mitigates misallocation of effort among the tasks but tightens the self‐enforcing constraint. Consequently, task separation is optimal if and only if the discount factor is high. Some tasks may not be assigned to the agents at all under the optimal job design. When the principal provides explicit incentives as well, it may be the case that task bundling is suboptimal for any discount factor.

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Trust, Investment and Competition: Theory and Evidence from German Car Manufacturers

Cited by 2 publications

References 29 publications

Precontractual investment and modes of procurement

Precontractual investment and modes of procurement

On Multitasking and Job Design in Relational Contracts*

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