Relational Adaptation Under Reel Authority
Author(s)Gibbons, Robert S.
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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.
DepartmentSloan School of Management
Institute for Operations Research and the Management Sciences (INFORMS)
Barron, Daniel et al. “Relational Adaptation Under Reel Authority.” Management Science, 66, 5 (May 2020): 1868-1889 © 2020 The Author(s)
Author's final manuscript