Supply Chain Relationships And Contracts: The Impact Of Repeated Interaction

Topics:
Negotiations and Contracts
Tags:
Business Operations,
Strategy,
Research & Development,
Product Marketing,
Product Development,
Marketing,
Management,
Firm,
Columbia University,
Supply Chain
Source:
Columbia University

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Overview: Consider a firm developing an innovative product. Due to market pressures, production must begin soon after the product development effort is complete, which requires that an upstream supplier invest in capacity while the design of the product and production process are in flux. Because the product is ill-defined at this point in time, the firms are unable to write court-enforceable contracts that specify the terms of trade or the supplier's capacity investment. However, the firms can adopt an informal agreement (relational contract) regarding the terms of trade and capacity investment. The potential for future business provides incentive for the firms to adhere to the relational contract.

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Format: PDF | Size: 438KB | Date: Dec 2006 | Pages: 38

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