Contractual form and market thickness in trucking

Research output: Contribution to journalArticlepeer-review

56 Scopus citations

Abstract

A central proposition of the transaction costs literature is that firms will substitute more complicated contractual arrangements for simple spot arrangements when transactions involve relationship-specific investments. I investigate this proposition by testing whether simple spot arrangements are less common when local trucking markets are thin. I find that doubling the thickness of the market increases the likelihood that simple spot arrangements govern transactions by about 30% for long hauls. I find weaker evidence of relationships between local market thickness and contractual form for short hauls - hauls for which quasi-rents are particularly small. Contracts protect quasi-rents over a surprisingly large range, but they play a less important role as quasi-rents decrease.

Original languageEnglish (US)
Pages (from-to)369-386
Number of pages18
JournalRAND Journal of Economics
Volume32
Issue number2
DOIs
StatePublished - 2001

ASJC Scopus subject areas

  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Contractual form and market thickness in trucking'. Together they form a unique fingerprint.

Cite this