蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Take the Goods and Run: Contracting Frictions and Market Power in Supply Chains
蝌蚪网 Review
(pp. 582–626)
Abstract
This paper studies the efficiency of self-enforced relational agreements, a common solution to contracting frictions, when sellers have market power and contracts cannot be externally enforced. To this end, I develop a dynamic contracting model with limited enforcement in which buyers can default on their trade credit debt and estimate it using a novel dataset from the Ecuadorian manufacturing supply chain. The key empirical finding is that bilateral trade is inefficiently low in early periods of the relationship, but converges toward efficiency over time, despite sellers' market power. Counterfactual simulations imply that both market power and enforcement contribute to inefficiencies in trade.Citation
Brugu茅s, Felipe. 2026. "Take the Goods and Run: Contracting Frictions and Market Power in Supply Chains." 蝌蚪网 Review 116 (2): 582–626. DOI: 10.1257/aer.20230264Additional Materials
JEL Classification
- D86 Economics of Contract: Theory
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- K12 Contract Law
- L14 Transactional Relationships; Contracts and Reputation; Networks
- L60 Industry Studies: Manufacturing: General
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology