Logo Logo

Contractual Form and Market Thickness in Trucking, RAND Journal of Economics

Abstract

A central proposition of the transaction costs literature is that firms will substitute more complicated contractual arrangements for simple spot arrangements when transactions involve relationship-specific investments. I investigate this proposition by testing whether simple spot arrangements are less common when local trucking markets are thin. I find that doubling the thickness of the market increases the likelihood that simple spot arrangements govern transactions by about 30% for long hauls. I find weaker evidence of relationships between local market thickness and contractual form for short hauls-hauls for which quasi-rents are particularly small. Contracts protect quasi-rents over a surprisingly large range, but they play a less important role as quasi-rents decrease.

Type

Article

Author(s)

Thomas N. Hubbard

Date Published

2001

Citations

Hubbard, N. Thomas. 2001. Contractual Form and Market Thickness in Trucking. RAND Journal of Economics. 32(2): 369-386.

KELLOGG INSIGHT

Explore leading research and ideas

Find articles, podcast episodes, and videos that spark ideas in lifelong learners, and inspire those looking to advance in their careers.
learn more

COURSE CATALOG

Review Courses & Schedules

Access information about specific courses and their schedules by viewing the interactive course scheduler tool.
LEARN MORE

DEGREE PROGRAMS

Discover the path to your goals

Whether you choose our Full-Time, Part-Time or Executive MBA program, you’ll enjoy the same unparalleled education, exceptional faculty and distinctive culture.
learn more