Trust in Vertical Relations

Trust in Vertical Relations

By:	Giacomo Calzolari; Leonardo Felli; Johannes Koenen; Giancarlo Spagnolo; Konrad Stahl
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.
URL:	http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2024_530&r=ind