Citation

Discussion Paper Details

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Title: Competition and Trust: Evidence from German Car Manufacturers

Author(s): Leonardo Felli, Johannes Koenen and Konrad O Stahl

Publication Date: February 2011

Keyword(s): Car manufacturers, Competition, German automotive industry, Hold-up problem, Specific investment, Suppliers and Trust

Programme Area(s): Industrial Organization

Abstract: We explore the determinants and effects of trust relationships between upstream suppliers and downstream producers. Using unique survey data on individual supplier-buyer relationships in the German automotive industry, we show, by means of different measures of supplier-buyer trust, that higher levels of trust mitigate relationship-specific underinvestment in a classical hold-up situation. Moreover, contrary to the extant literature, we show that higher levels of supplier's trust are reflected in the buyer's choice of a more competitive procurement strategy among potential suppliers.

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Bibliographic Reference

Felli, L, Koenen, J and Stahl, K. 2011. 'Competition and Trust: Evidence from German Car Manufacturers'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8265