The Economics of Contracts: Theories and Applications

By Eric Brousseau; Jean-Michel Glachant | Go to book overview

19
The quasi-judicial role of large retailers:
an efficiency hypothesis of their relation
with suppliers
Benito Arruñada

1 Introduction

1.1 The problem

In recent years, public discussion concerning large retailers and their suppliers has been growing in intensity. It is often claimed that large retailers are endowed with overwhelming bargaining power and that they abuse this power in their relations with suppliers. New regulations have already been introduced and new regulatory initiatives are often proposed. 1 This work formulates and tests an alternative hypothesis, according to which large retailers efficiently perform a function similar to that of a court of first instance, that is, they act as second-party enforcers in their relationships with suppliers.

The empirical analysis is consistent with the argument that, in order to perform this function, large retailers exercise a set of implicit and explicit rights to “complete” or fill the gaps in the contract, to evaluate their own and the other party's performance and to impose due sanctions. Safeguards against opportunistic behavior in the performance of these quasi-judicial functions follow directly from the retailers' own interest in maintaining their reputation and the relationship with the suppliers, and in continuing to perform the double role of judge and interested party. It is rarely optimal, however, to eliminate opportunism completely. In retailing, failures in safeguards arise especially when the retailer's time horizon is unexpectedly shortened or his decentralized decisions are imperfectly controlled. Regarding these residual and potentially efficient distortions, it is claimed that regulation could hardly provide better incentives than market competition.

The chapter pays special attention to the most problematical aspects of the relationship between suppliers and retailers: the duration of the payment period, payment delays, and the revision of the clauses before the end of the contract term. Quantitative empirical evidence aiming to explain these phenomena in terms of efficiency is presented. On the one

-337-

Notes for this page

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this page

Cited page

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited page

Bookmark this page
The Economics of Contracts: Theories and Applications
Table of contents

Table of contents

Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this book

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this book
  • Bookmarks
  • Highlights & Notes
  • Citations
/ 584

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.