Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248907 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9362
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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 quality of the automotive parts and more competition among suppliers. Yet both effects hold only for parts involving unsophisticated technology, not when technology is sophisticated. We rationalize these findings within a relational contracting model that critically focuses on changes in the bargaining power, due to differences in the costs of switching suppliers.
Subjects: 
relational contracts
hold-up
buyer-supplier contracts
bargaining power
JEL: 
D86
L14
L62
O34
Document Type: 
Working Paper
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