Relational Contracts: Recent Empirical Advancements and Open Questions

Relational contracts - informal self-enforcing agreements sustained by repeated interactions - are ubiquitous both within and across organizational boundaries. This review highlights recent empirical contributions in selected areas. We begin by reviewing some recent work that explicitly takes the dynamic incentive compatibility constraints that underpin relational contract models to the data. We then discuss the relationship between relational contracting and firms' performance. We conclude pointing in directions that we consider to be particularly ripe for future work.