Relational Adaptation under Reel Authority
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.
Daniel Barron, Robert Gibbons, Ricard Gil, Kevin J. Murphy
Barron, Daniel, Robert Gibbons, Ricard Gil, and Kevin J. Murphy. 2018. Relational Adaptation under Reel Authority.