Clarity in relational contracts

This research investigates the role of clarity in relational contracts and its importance for sustaining cooperation over time. Using controlled experiments, it examines how trading partners develop a shared understanding of informal agreements and how uncertainty and limited observability affect their ability to cooperate successfully.

Recent research in organisational economics highlights clarity in relational contracts as a potential explanation for persistent differences in firm performance. Relational contracts allow trading partners to sustain cooperation informally by relying on the long-term benefits of cooperative behaviour rather than on formally enforceable agreements.

Although the conditions required to sustain such cooperation are relatively straightforward from a game-theoretic perspective, trading partners face substantial practical challenges. In particular, they must develop a shared understanding of the content of their relational contract while coping with uncertainty and the limited observability of each other’s actions.

This research uses controlled experiments to provide empirical evidence on this clarity problem. It examines how trading partners establish mutual understanding, how uncertainty and unobservable actions affect cooperation, and which mechanisms help them successfully initiate and manage relational contracts.

Publication in peer-reviewed journal

Gibbons, R., Grieder, M., Herz, H., & Zehnder, C. (2023). Building an equilibrium: Rules vs. principles in relational contracts. Organization Science, 34(6), 2231-2249

Collaborateurs

Prof. Manuel Grieder Co-investigator

Prof. Dr Holger Herz Co-investigator, University of Fribourg

Christian Zehnder Co-investigator, University of Lausanne

Robert S. Gibbons Co-responsable de projet, MIT, U.S.