Client firms avoid opportunistic defection through advance warnings allowing partners to match competitors

Evidence

This brings us to my second point, the meaning of the term ‘partnership’ or the expectations implicit in the moral contract. Partnership clearly implies something more than what is stated on the order form. It is not merely a question of not buying more than you know you can pay for. It seems rather to involve the following: in exchange for improved performance by the subcontractor on quality and delivery, the client firm will make every effort to guarantee a level of work; furthermore, any adaptations to price, quantity, and delivery are to be made in a nonopportunistic way by both sides, with full disclosure of the relevant information. In particular, this implies that the subcontractor will not be unconditionally dropped if a differential in terms of price or quality emerges with respect to competitors. Rather, clients stated that they operate a system of advance warnings; a reasonable period is allowed to their partner to match the competition. — Diego Gambetta, Trust - Making and Breaking Cooperative…, 2602

Categorization

• XREF: Directly evidences the trust-through-observable-constraints thesis from Hardin matching the Saramago reading frame; also connects to the Law Merchant reputation mechanisms from Milgrom work.