A signaling-based theory of contractual commitment to relationships

Vasconcelos, L

A signaling-based theory of contractual commitment to relationships

Vasconcelos, L

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Publication Type:: Journal Article
Citation:: European Economic Review, 2017, 93 pp. 123 - 138
Issue Date:: 2017-04-01

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Field	Value	Language
dc.contributor.author	Vasconcelos, L https://orcid.org/0000-0002-2952-5674	en_US
dc.date.issued	2017-04-01	en_US
dc.identifier.citation	European Economic Review, 2017, 93 pp. 123 - 138	en_US
dc.identifier.issn	0014-2921	en_US
dc.identifier.uri	http://hdl.handle.net/10453/135745
dc.description.abstract	© 2017 Elsevier B.V. In this paper I present signaling as an explanation for how and why parties commit to relationships when they initially contract about the terms of those relationships. Two forms of contractual commitment to a relationship are considered: a promise to trade in the future (contracted quantity); and a promise not to trade with anyone else (contracted exclusivity). A party is said to commit more to a relationship if it commits initially to trade a higher quantity and/or to a higher level of exclusivity. I characterize equilibrium contracts and therefore commitment. Both the ability to signal information through an exclusivity commitment and whether the informed party commits more to the relationship when the relationship is more likely to succeed depend on the source of the asymmetry of information.	en_US
dc.relation.ispartof	European Economic Review	en_US
dc.relation.isbasedon	10.1016/j.euroecorev.2017.02.001	en_US
dc.rights	info:eu-repo/semantics/openAccess
dc.subject.classification	Economics	en_US
dc.title	A signaling-based theory of contractual commitment to relationships	en_US
dc.type	Journal Article
utslib.citation.volume	93	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	14 Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access	*
pubs.publication-status	Published	en_US
pubs.volume	93	en_US

Abstract:

© 2017 Elsevier B.V. In this paper I present signaling as an explanation for how and why parties commit to relationships when they initially contract about the terms of those relationships. Two forms of contractual commitment to a relationship are considered: a promise to trade in the future (contracted quantity); and a promise not to trade with anyone else (contracted exclusivity). A party is said to commit more to a relationship if it commits initially to trade a higher quantity and/or to a higher level of exclusivity. I characterize equilibrium contracts and therefore commitment. Both the ability to signal information through an exclusivity commitment and whether the informed party commits more to the relationship when the relationship is more likely to succeed depend on the source of the asymmetry of information.

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http://hdl.handle.net/10453/135745