Template-Type: ReDIF-Paper 1.0
Author-Name: Guido Merzoni
Author-Email: guido.merzoni@unicatt.it
Title: A theory of trust failure and vertical integration in industrial districts
Abstract: We model the interaction of independent firms within an industrial district as a repeated game of trust, where cooperative outcomes are not due to the cultural attitudes of the players, but the result of non-cooperative behaviour taking place in a stable organizational setting. When the outside option of changing partners is not too attractive, cooperation may arise also without ties between firms; when such attractiveness increases, cooperation may only be guaranteed by making the relationship more stable through a formal commitment, which may lead to a fullyfledged vertical integration. As the efficiency gains of changing partners becomes even larger, stable relationships are no longer optimal and the traditional model of industrial districts breaks down.
Keywords: trust relationships, industrial districts, vertical integration
Classification-JEL: L14, L23, C72
Creation-Date: 2010
File-URL: http://dipartimenti.unicatt.it/economia_internazionale_istituzioni_sviluppo_1001.pdf
File-Format: Application/PDF
Number: dis1001
Handle: RePEc:dis:wpaper:dis1001