Relational Adaptation Under Reel Authority

Johns Hopkins Carey Business School Research Paper No. 18-06

USC CLASS Research Papers Series No. CLASS18-9

USC Legal Studies Research Papers Series No. 18-9

64 Pages Posted: 16 Apr 2018 Last revised: 23 Jul 2018

See all articles by Daniel Barron

Daniel Barron

Northwestern University Kellogg School of Management

Robert S. Gibbons

Massachusetts Institute of Technology - Sloan School and Department of Economics; National Bureau of Economic Research (NBER)

Ricard Gil

Queen's University (Canada) - Smith School of Business; Johns Hopkins University - Carey Business School

Kevin J. Murphy

University of Southern California - Marshall School of Business; USC Gould School of Law

Date Written: April 18, 2018

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 efficient relational adaptation. 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 rewarding the exhibitor for making efficient adaptation decisions.

Keywords: adaptation, renegotiation, relational contracts

JEL Classification: L14, L22, L23

Suggested Citation

Barron, Daniel and Gibbons, Robert S. and Gil, Ricard and Murphy, Kevin J., Relational Adaptation Under Reel Authority (April 18, 2018). Johns Hopkins Carey Business School Research Paper No. 18-06; USC CLASS Research Papers Series No. CLASS18-9; USC Legal Studies Research Papers Series No. 18-9. Available at SSRN: https://ssrn.com/abstract=3153155 or http://dx.doi.org/10.2139/ssrn.3153155

Daniel Barron

Northwestern University Kellogg School of Management ( email )

Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208
United States

Robert S. Gibbons

Massachusetts Institute of Technology - Sloan School and Department of Economics ( email )

E52-432
MIT
Cambridge, MA 02142
United States
617-253-0283 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ricard Gil

Queen's University (Canada) - Smith School of Business ( email )

Smith School of Business - Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu

Kevin J. Murphy (Contact Author)

University of Southern California - Marshall School of Business ( email )

BRI 308, MC 0804
Los Angeles, CA 90089-0804
United States
213-740-6553 (Phone)
213-740-6650 (Fax)

USC Gould School of Law

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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