MGT 528 – Operations: Economics and Strategy

8. Cooperation and Relational Contracts

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       Lecture Notes (Overheads Used In Class)

· Lecture 8 – Slides

Reading (Preparation)

· Dixit/Nalebuff (1991) Thinking Strategically, Norton, Ch. 4.

Questions (Preparation)

· Can contracts between competing parties work if they are not per se court-enforceable? Explain.

· Why are contracts often ‘incomplete’?

Background Reading (for future reference only)

· Baker, G., Gibbons, R., Murphy, K.J. (2002) “Relational Contracts and the Theory of the Firm,” Quarterly Journal of Economics, Vol. 117, No. 1, pp. 39—83.

· Levin, J. (2003) “Relational Incentive Contracts,” American Economic Review, Vol. 93, No. 3, pp. 835—857.