Relational adaptation under reel authority

Daniel Barron, Robert Gibbons*, Ricard Gil, Kevin J. Murphy

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

We study relationships between parties who have different preferences about how to tailor decisions to changing circumstances. Our model suggests that relational contracts supported by formal contracts may achieve relational adaptation that improves on adaptation decisions achieved by formal or relational contracts alone. Our empirics consider revenue-sharing contracts between movie distributors and an exhibitor. The exhibitor has discretion about whether and when to show a movie, and the parties frequently renegotiate formal contracts after a movie has finished its run. We document that such ex post renegotiation is consistent with the distributor rewarding the exhibitor for adaptation decisions that improve their joint payoffs.

Original languageEnglish (US)
Pages (from-to)1868-1889
Number of pages22
JournalManagement Science
Volume66
Issue number5
DOIs
StatePublished - May 2020

Keywords

  • Adaptation
  • Relational contracts
  • Renegotiation

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research

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