Speaker : Kenneth S. Corts (Rotman School of Management – University of Toronto)

Paper : Long Term Contracts and Repeated Interactions : Evidence From The Costa Rican Coffee Market

Kenneth Corts is the Associate Dean of Undergraduate Education and Director of Rotman Commerce, the undergraduate program offered jointly by Rotman and the Faculty of Arts and Science. His research focuses on the application of microeconomics and game theory to business strategy, contracting, organizational design, competition policy, and technology adoption. He has served as Editor of the Journal of Industrial Economics, testified as an expert witness for the Canadian Competition Bureau, and authored several Harvard Business School case studies used at leading schools around the world. His publications as well as more details about his CV and research activity are available at: http://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Corts.aspx

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Abstract : This paper uses contract-level data from the Costa Rican coffee industry to explore the relationship between formal and relational contracting. We find that in this setting more intensive contracting relationships lead to greater use of long-term contracts, which are used to ensure the supply of raw materials and to protect the parties against hold-up in this industry. The result persists when we address identification problems such as unobservable heterogeneity and endogenous matching through a variety of fixed effects and instrumenting strategies. We interpret this as evidence that relational contracting acts as a complement to formal contracting by improving the enforceability of formal contracts.

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Authors : Kenneth S. Corts (Rotman School of Management – University of Toronto) and Octavio Martinez (Rotman School of Management – University of Toronto)