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dc.titlePreliminary Findings: Task Clarity and Credibility in Relational Contracts
dc.contributor.authorAntic, Nemanj
dc.contributor.authorMorjaria, Ameet
dc.contributor.authorTalamas Marcos, Miguel Ángel
dc.contributor.orgunitDepartment of Research and Chief Economist
dc.coverageAfrica
dc.date.available2024-09-09T00:09:00
dc.date.issue2024-09-09T00:09:00
dc.description.abstractWe develop and test a relational contracting model where building relationships requires the principal and agent to solve task clarity and credibility problems. We model task clarity as the likelihood of the agent finding a productive action for the principal and demonstrate that it influences the agents propensity to fulfill promises the usual notion of credibility in relational contracts. This is because improving task clarity increases the ease of replacing a relationship after a defection, making defection more tempting. We validate our model using a decade of administrative data from the Ethiopian floriculture industry. Our estimation documents that: i) task clarity problems are economically relevant in the industry and larger for domestic firms, ii) consistent with a unique prediction of our model, domestic firms, due to their lower task clarity and despite a lower discount factor, are less likely to defect on relationships as a response to improvements in the outside option, and iii) the buyer and seller components of task clarity explain differences between foreign and domestic firms in credibility and overall success in relational contracts.
dc.format.extent52
dc.identifier.doihttp://dx.doi.org/10.18235/0013146
dc.identifier.urlhttps://publications.iadb.org/publications/english/document/Preliminary-Findings-Task-Clarity-and-Credibility-in-Relational-Contracts.pdf
dc.language.isoen
dc.publisherInter-American Development Bank
dc.subjectSmall Business
dc.subjectPerformance Based Contract
dc.subjectSmart Contract
dc.subjectAuction
dc.subjectIndustry
dc.subjectContract Management
dc.subjectDebtor Finance
dc.subjectAgricultural Research
dc.subjectExport
dc.subjectAgricultural Credit
dc.subjectEquality
dc.subjectIntegration and Trade
dc.subjectExport Activity
dc.subject.jelcodeD86 - Economics of Contract: Theory
dc.subject.jelcodeF14 - Empirical Studies of Trade
dc.subject.jelcodeL14 - Transactional Relationships • Contracts and Reputation • Networks
dc.subject.jelcodeO13 - Agriculture • Natural Resources • Energy • Environment • Other Primary Products
dc.subject.jelcodeO19 - International Linkages to Development • Role of International Organizations
dc.subject.jelcodeQ17 - Agriculture in International Trade
dc.subject.keywordsContract theory;Relational contracts;Agriculture
idb.identifier.pubnumberIDB-DP-01074
idb.operationRG-K1415
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