Template-Type: ReDIF-Paper 1.0
Title: Trust in Vertical Relations
Author-Name: Giacomo Calzolari
Author-Email: 
Author-Name: Leonardo Felli
Author-Email: 
Author-Name: Johannes Koenen
Author-Email:
Author-Name: Giancarlo Spagnolo
Author-Email:
Author-Name: Konrad Stahl
Author-Email: konrad.stahl@uni-mannheim.de
Classification-JEL: D86, L14, L62, O34

Keywords: Relational Contracts, Hold-up, Buyer-Supplier Contracts, Bargaining Power


Abstract: Using data from a unique survey on all buyers and crtical suppliers in German automotive
production, we explore the role of trust in long-term procurement relationships. Higher trust
leads to higher quality of the automotive parts, and to more competition among suppliers.
These effects are significant for low-tech parts only, and not for high tech ones, even when the
buyer procures parts from the same supplier. We rationalize these unexpected findings within a
relational contracting model, where technology-specific differences in the cost of switching
suppliers determine the bargaining power in part-specific procurement relationships.

Note: 
Length: 65
Creation-Date: 2024-04
Revision-Date: 
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp530
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2024_530