How Wide is the Scope of Hold-Up-Based Theories? Contractual Form and Market Thickness in Trucking

Thomas N. Hubbard

NBER Working Paper No. 7347
Issued in September 1999
NBER Program(s):   IO

How far do the contractual implications of hold-up-based theories (Klein, Crawford, and Alchian (1978), Williamson (1979, 1985)) extend? I investigate this in the context of trucking. Quasi-rents in trucking are generally smaller than in the contexts studied in the previous empirical literature. They vary with hauls' distance and the thickness of local markets. 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' role as protectors of quasi-rents becomes less important as quasi-rents decrease, but exists over a surprisingly large range.

(101 K)

Published: Hubbard, Thomas N. "Contractual Form And Market Thickness In Trucking," Rand Journal of Economics, 2001, v32(2,Sumer), 369-386.

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