Report on 4th Relational Contracts Workshop

By Marta Troya Martinez

The fourth Workshop on Relational Contracts was hosted by the Becker Friedman Institute and the Coase-Sandor Institute for Law and Economics at the University of Chicago. We* want to particularly thank the Becker Friedman Institute for providing generous funding which made this year’s workshop possible.

The focus of this ongoing and rotating annual workshop is to enhance our understanding of informal relationships as a key tool to design and manage organizations. As many scholars across a wide variety of disciplines have emphasized, firms motivate and coordinate their suppliers, employees, and partners not solely via formal contractual provisions and incentives, but also via informal and more nuanced “relational contracts” that are self-enforcing due to the parties’ desire to continue collaborating in the future. Relational contracts are essential in a wide variety of settings, from employment relationships to supply chains, distribution networks, and strategic alliances.

For the first time, this edition of the workshop brought together practitioners as well as academics from different disciplines including law, economics, political science and history. This interdisciplinary exchange broadened our understanding of what relational contracts are, and how they interact with formal ones.

Answering the question “Why do we use relational contracts?”, economists usually assume that many actions and outcomes that are relevant to a contractual relationship cannot be verified by courts, and hence cannot be included in a formal contract. Instead, legal scholars and practitioners are more optimistic on courts’ verification capabilities, but reckon that using courts is costly due to contractual incompleteness and unforeseen contingencies, the reputational concerns associated to a lawsuit, inefficiencies in the operation of courts, and the like. Models of relational contracting based on the legal view of “non-contractibility” may yield different predictions from those of conventional economic models, and should be explored both theoretically and empirically. Thus, the spirited debate between lawyers and economists on the role of courts was extremely fruitful in indicating new perspectives for future interdisciplinary research on relational contracting. We hope to see some of the results of this new agenda in the 2019 edition of the Workshop on Relational Contracts. More information on next year’s workshop will soon be provided on

* The local organizer was Lisa Bernstein, the program can be found here. The annual Workshop on Relational Contracts is organized by Daniel Barron, Matthias Fahn, Marta Troya Martinez and Giorgio Zanarone.