markets hierarchies and information on a paradox in the economics of organization abstract the literature on the economics of organization presents the following paradox on the one hand firms are said to be repositories of superior information about input characteristics on the other hand markets are said to be superior to hierarchies in coordinating resource allocation because hierarchies are forced to aggregate heterogeneous inputs into homogeneous categories this paper suggests reasons for the association of firms with refined input information and argues that it is not their hierarchical features but their provision of an appropriate framework for rent sharing that is responsible for this association

explaining firm capital structure the role of agency theory vs transaction cost economics the study of capital structure has increasingly gained importance in strategic management research paradigms derived from organizational economics have also gained popularity in explaining firm actions agency theory and transaction cost economics represent two such paradigms that rely on the notion of market imperfections notwithstanding the similarities between them these two offer different explanations of the role of debt and equity in a firm the governance abilities of the financing structures and the nature of assets of the firm provide two key sources of differences viewing capital structure from transaction cost economics gives rise to predictions that are contradictory to those presented by agency theory it is argued that the extant evidence mainly supports the transaction cost viewpoint two organizational phenomena leveraged buyouts and product diversification are used to highlight the comparison

simple contracts renegotiation under asymmetric information and the hold up problem abstract in this article it is demonstrated that voluntary bargaining over a collective decision under asymmetric information may well lead to ex post efficiency if the default decision is non trivial it is argued that the default decision may be interpreted as a simple contract that the parties have written ex ante this result is used in order to show that simple unconditional contracts which are renegotiated may allow the hold up problem to be solved even if the parties valuations are private information

incentive compatible regulation of foreign owned subsidiaries a tax simulation for the jamaican bauxite industry abstract in 1974 jamaica replaced the corporate income tax on multinationals in the bauxite sector with a production levy on bauxite in order to increase tax revenue the results were mixed tax revenue jumped initially but the multinationsl quickly started shifting production elsewhere we model jamaica s taxation problem assuming that it has incomplete information about the multinationals costs and derive the optimal incentive compatible tax mechanism we simulate and compare the effects on output and tax revenue of the actual and the incentive compatible tax regimes and conclude that there might be substantial benefits to implementing an incentive mechanism

modularity in technology and organization this paper is an attempt to raid both the literature on modular design and the literature on property rights to create the outlines of a modularity theory of the firm such a theory will look at firms and other organizations in terms of the partitioning of rights understood as protected spheres of authority among cooperating parties and it will assert that organizations reflect nonmodular structures that is structures in which decision rights rights of alienation and residual claims to income do not all reside in the same hands 2002 elsevier science b v all rights reserved

evolving standards for academic publishing a q r theory this paper develops models of quality standards to examine two trends academic journals increasingly require extensive revisions of submissions and articles are becoming longer and changing in other ways papers are modeled as varying along two quality dimensions q reflects the importance of the main ideas and r other aspects of quality observed trends are regarded as increases in r quality a static equilibrium model illustrates comparative statics explanations a dynamic model in which referees with a biased view of their own work learn social norms for weighting q and r is shown to produce a long gradual evolution of social norms

the firm as a nexus of treaties part 1 knowledge its acquisition sharing and or asymmetry the participatory generation of information rents and the theory of the firm masahiko aoki common knowledge and the co ordination of economic activities jacques cremer profit sharing information and employment matti pohjola part 2 vertical integration and the strategic management of the enterprise what is vertical integration michael h riordan vertical integration transaction costs and learning by using kurt lundgren the firm as a nexus of internal and external contracts torger reve part 3 issues of labour organization the viability of worker ownership an economic perspective on the political structure of the firm henry hansmann intellectual skill and the role of employees as constituent members of large firms in contemporary japan kazuo koike the implicit contract for corporate law firm associates ex post opportunism and ex ante bonding robert h mooking part 4 finance and the political structure of the firm capital structure as a mechanism of control a comparison of financial systems erik berglof long term contracts in financial markets hakan lindgren the principle of external accountability in competitive markets herbert gintis union militancy and plant designs kar ove moene can transaction cost economics explain trade associations marc schneiberg and j rogers hollingsworth

contractual contingencies and renegotiation in a dynamic model of asymmetric information between the owner of a firm and a manager we investigate the optimal set of contingencies on which an incentive contract should depend when renegotiation is possible in particular we characterize the circumstances in which the contracting parties find it desirable to deliberately restrict what the owner can monitor thereby limiting the contractible contingencies our findings thus provide an endogenous explanation for contract simplicity in contrast to those based on transactions costs or bounded rationality

renegotiation and information revelation over time the case of optimal labor contracts the paper analyzes the issue of commitment in grossman and hart s model of optimal labor contracts under asymmetric information about firm profitability we extend their framework by allowing employment to vary over time at equidistant intervals when both parties can precommit ex ante not to renegotiate the contract this replicates the grossman hart outcome each subperiod when precommitment is not possible information revealed through the contract can create pareto improving renegotiation opportunities and the issue of optimal information revelation arises the paper analyzes the impact of ex post pareto improving renegotiations on the optimal contract

the impact of economics on management abstract this article analyzes the impact of economics on management by examining citations of 71 management journals aer jpe econometrica and qje have the highest impact industrial organization journals also have a particularly large impact the share of economics in management citations drops from 9 91 percent until 1995 to 5 70 percent for 1996 2005 three possible explanations for this decrease are analyzed economics research became more mathematical because management is a younger discipline it grew faster than economics in quantity and quality of research and interdisciplinary spillover of research is slower than the spillover within a discipline only the second explanation is supported by the data

markets as institutions versus organizations as markets disentangling some fundamental concepts abstract this paper argues that ambiguities in concepts as important as institutions markets and organizations undermine progress of research programs intending to take these components seriously into account after a short review of some current confusions section i section ii discusses recent literature to arrive at definitions that encapsulate fundamental characteristics into pure categories in section iii exceptions and qualifications are introduced so as to operationalize the concepts in the real world 1 i organizations and markets are embedded in an institutional framework and 2 ii they overlap giving birth to hybrid forms however the conclusion contends that it is essential to maintain distinct concepts in order to understand these complex arrangements

on renegotiation design a central concern of contract theory is to investigate departures from the first best paradigm in which rational agents could in principle achieve unrestrained efficiency through complete long term contingent contracts in order to take into account some of the observed limitations in real life contracts attention has been paid to informational problems one focus has been on asymmetries of information between contractors adverse selection and moral hazard have been used for example to analyze insurance problems labor contracts managerial incentives regulation of monopolies vertical restraints or the financial structure of firms see for example hartholmstrom 1987 for a survey of these issues attention has also been devoted to private information shared by the parties but unavailable to outsiders like courts that is observable but unverifiable information asymmetries of information between contractors introduce constraints which indeed most often prevent to achieve first best efficiency unfortunately this paradigm involves technical difficulties which explains why most contributions focus on unidimensional asymmetries and may leave some undeterminacies as to the form of optimal contracts e g if there are more than one asymmetry or the size of the inetliciencies there may for instance exist several equilibria which are more or less inefficient the last paradigm observable but unverifiable information is technically more convenient what is not clear however is the extent to which the presence of unverifiable information may prevent achieving first best

interindustry technology flows and productivity growth a reexamination the relationship between productivity growth and r and d intensity is reexamined using detailed data for 193 us manufacturing industries and a breakdown of r and d into own product and process improvement oriented components and imported r and d from other industries a significant interindustry relationship between total factor productivity growth and r and d intensity is reconfirmed with used r and d having larger coefficients than own product r and d components but own product r and d is also significant and the explanatory power of the used r and d component rather than the embodied component imported from other industries thus the evidence for r and d spillovers remains tenuous 6 references 2 tables

optimal labour contracts under asymmetric information an introduction the review of economic studies has instituted a new series of lectures to be given annually by a younger british economist at the association of university teachers of economics meetings the choice of lecturer is determined by a panel whose members are currently professors hahn mirrlees and nobay this paper is a revised version of the first lecture in the series it was presented at the aute meeting held at the university of surrey in april 1982 and was refereed in the usual way mak

infrastructure privatization and changes in corruption patterns the roots of public discontent abstract this paper offers a theory of how the degree of corruption that prevails in a society responds to changes in the ownership structure of major public service providers we show that there are cases in which privatization even though it fosters investments in infrastructure also opens the door to more corruption the public dissatisfaction towards privatization is then crucially affected by the changes in the degree and pattern of corruption our model thus helps understand the seemingly paradoxical situation prevailing in latin america where most studies find that privatizations have been efficiency enhancing and have fostered investments and at the same time popular dissatisfaction with the process is extremely high especially among the middle class we show that this line of explanation is consistent with the evidence from surveys in the region

evolution of social norms with heterogeneous preferences a general model and an application to the academic review process abstract the article presents a model of social norm evolution that suggests how the increase in optimal and actual first response times frt of economics journals can be related when the optimal frt and the norm about how much time refereeing should take increase it seems that the existence of a norm increases the average refereeing time the model suggests the surprising result that this is not necessarily true i also discuss applications of the model in other contexts differences in the optimal frt between disciplines the effects of the frt on the tenure process and strategic behavior of referees

the principal agent problem when the agent has access to outside markets abstract principal agent models assume that the agent must consume the payments he receives under the incentive contract this paper shows that if the agent can trade his payments on frictionless state contigent markets only a flat wage or a full residual claim for the agent are viable

the slowdown in first response times of economics journals can it be beneficial the first response time henceforth frt of economics journals has increased over the last four decades from 1 2 months to 3 6 months the optimal frt however is not zero because the frt deters submission of mediocre papers to good journals and consequently saves valuable time of referees and editors the change in the actual frt is in the same direction as the change in the optimal frt which has increased because of the availability of research on the internet prior to publication and because the costs of refereeing a paper have increased

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

cost observability and renegotiation abstract a project requires an initial specific investment the total cost of the project depends on the probability that the supplier will experience a delay in the production schedule this probability is the supplier s private information the buyer would like to hire a supplier with a low probability of delay however it can offer a screening contract only by committing to terminate the project if the supplier is not able to complete it within the original budget limits we show that cost observability may prevent the buyer from terminating a cost overrun project and this in turn prevents screening out bad suppliers thus we provide an example in which superior monitoring ability represents a disadvantage for the buyer this finding contrasts with the common argument that better monitoring represents an advantage of integrated organizations

commitment through renegotiation proof contracts with third parties the paper analyzes contracts as means of strategic commitment that is commitment against outside parties to the agreement it considers the example of an incumbent firm which enters a contractual relationship with its workers in order to deter entry it assumes away the possibility for the parties to precommit not to make pareto improving renegotiations of the agreement once entry has taken place under symmetric information the contract is thus found to be useless for entry deterrence if the incumbent firm or workers possess some private information excessive post entry production levels can however be sustained ex post since output reductions may not be incentive compatible while information asymmetries are usually welfare decreasing when the goal is optimal risk sharing they can thus be welfare improving for the contracting parties when commitment against outsiders is the goal of the contract the role of the renegotiation process as a constraint on sustainable agreements is stressed in the paper and the general relevance of strategic contractual commitment is discussed

contract design and non cooperative renegotiation abstract we study a contract design setting in which the contracting parties cannot commit not to renegotiate previous contract agreements in particular we characterize the outcome functions that are implementable for an uninformed principal and an informed agent if having observed the agent s contract choice the principal can offer a new menu of contracts in its place an outcome function can be implemented in this setting if and only if it is optimal for the principal for some belief over agent types which is more pessimistic in the sense of the likelihood ratio order than the prior furthermore the outcome function cannot be too sensitive to variations in the agent s type we show that the direct revelation mechanism which implements such a function when renegotiation can be prevented will also implement it in any equilibrium when it cannot so the standard contract is robust to renegotiation

the relative impacts of economics journals 1970 1990 our data collection and database assembly efforts were assisted by john p sophocleus mark gwartney michele butler and scott ralston we received extremely valuable computer programming assistance from jon brunson and edward novak constructive comments were receivedfrom two anonymous reviewers financial supportfrom the faculty development committee at salisbury state university is gratefully acknowledged

early contract renegotiation an analysis of us labor contracts 1970 1995 this article examines the ex post flexibility of us labor contracts during the 1970 95 period by investigating whether unanticipated changes in inflation increase the likelihood of a contract being renegotiated prior to its expiration we find empirical support for this hypothesis specifically our results indicate that renegotiations are triggered principally by large and infrequent price shocks of either sign when combined with evidence that ex ante contract durations are shorter during episodes of increased inflation uncertainty our results suggest that these contracts are flexible both ex ante and ex post to changes in the evolution of inflation

the nature of the agricultural firm abstract models explaining the choice between rent wage and share contracts in agriculture abstract from the large variations within the classes of rent share and owner managed forms of organization regarding the extent to which a specific form accommodates specialization between labor and management as a result modern explanations of agricultural organizations are misleadingly dependent on risk aversion or the assumption that landowners have an absolute advantage in production decisions viewing the agricultural firm as a constitution instead of as a nexus of contracts facilitates an agency explanation of alternative organizational forms and their amenability to specialization

internal versus external economies in european countries in this paper sectoral production functions are estimated with a two digit disaggregation for eight european countries corresponding to the period 1978 1992 distinguishing between internal economies of scale and intersectoral external effects in order to avoid the possibility that the regressions carried out by way of panel data techniques are spurious the integration order of each variable has been identified using unit root similarly the hausman procedure has been applied to test the exogeneity of the variables and determine whether the most appropriate estimations should be sur or three stage least squares

contract renegotiation and coasian dynamics consider a long term relationship between a seller and a buyer whose valuation for a per period service or a durable good is private as trade progresses the valuation will be partially revealed and it may be impossible for the parties to commit ex ante not to take advantage of this we analyse this situation first by supposing that the parties can sign a sequence of short term contracts and secondly by supposing that they can sign a long term contract but cannot commit not to renegotiate it later we find a close relationship in the second case between the optimal long term contract and the non commitment outcome in the standard coasian durable good model our results also have implications for hidden information principal agent models

the relation between price and marginal cost in u s industry an examination of data on output and labor input reveals that some u s industries have marginal cost well below price the conclusion rests on the finding that cyclical variations in labor input are small compared with variations in output in booms firms produce substantially more output and sell it for a price that exceeds the costs of the added inputs the paper documents the disparity between price and marginal cost where marginal cost is estimated from annual variations in cost it considers a variety of explanations of the findings that are consistent with competition but none is found to be completely plausible

free labor for costly journals there is a remarkable difference between the prices that commercial publishers charge to libraries for economics journals and the prices charged by professional societies and university presses this price difference does not reflect a difference in quality the six most cited economics journals listed in the social science citation index are all nonprofit journals and their library subscription prices average about 180 per year only five of the 20 most cited journals are owned by commercial publishers and the average price of these five journals is about 1660 per year tables 1 and 2 compare library costs and measures of cost effectiveness for the ten most cited nonprofit journals and the ten most cited journals owned by commercial presses the average price per page of the commercial journals is about six times as high and the average price per citation is about 16 times as high as for the nonprofit journals in tables 1 and 2 the first column shows the year 2001 library subscription price and the second column shows the price per page calculated by dividing year 2001 price by the number of pages published in the year 2000 the third column reports the price per citation this is the library subscription price divided by the number of times that articles in this journal were cited in 1998 as recorded by the social science citation index the fourth column price per recent citation is the library subscription price divided by the number of times that the 1996 and 1997 volumes of the journal were cited in 1998 the citation rank is found by ranking journals according to the number of times that this journal was cited in 1998 the differences in prices and cost effectiveness between nonprofit and commercial journals are similar for less prestigious journals i have assembled a data

the slowdown of the economics publishing process over the last three decades there has been a dramatic slowdown of the publication process at top economics journals a substantial part is due to journals requiring more extensive revisions various explanations are considered democratization of the review process increases in the complexity of papers growth of the profession and cost and benefit arguments changes in the profession are examined using time series data connections between these changes and the slowdown are examined using paper level data there is evidence for some explanations but most of the slowdown remains unexplained changes may reflect evolving social norms

industrial strategy a missing link in british economic policy this paper critically analyzes the potential and limitations of economic instruments for environmental protection it presents a general framework for analyzing environmental issues along with a taxonomy for classifying different approaches to environmental protection a key contribution of the paper is to identify critical steps in marketing economic incentive approaches for environmental protection the challenge to researchers is to design tools that will help achieve environmental goals more effectively this means taking careful account of political technical and economic constraints in system design copyright 1993 by oxford university press

leadership beliefs and coordination an explorative discussion although recent economics contributions represent important strides forward in the understanding of leadership behavior the cognitive and symbolic dimensions of the phenomenon have attracted virtually no interests from economists and game theorists i argue that an understanding of these dimensions may be founded on coordination games particularly to the extent that these illustrate interactive belief formation in this context leadership is defined as the taking of actions that coordinate the complementary actions of many people through the creation of belief conditions that at least substitute for common knowledge and where these actions characteristically consists of some act of communication directed at those being led the concept of common knowledge or its approximation by means of notions of common belief is argued to be particularly important to understanding leadership thus leaders may establish common knowledge conditions and assist the coordination of strategies in this way or make decisions in situations where coordination problems persist in spite of common knowledge acknowledgments

post the washington consensus economic governance and industrial strategies for the twenty first century recent events in the global economy have led to a growing dissatisfaction with the neo liberal economic paradigm that has dominated economic policy over the last 30 years and the increasing concentration of and abuse of economic power within the corporate sector that has ensued however amidst calls for a new approach to economic management there is a danger that a new policy framework may overlook underlying economic governance structures that exist and may evolve within the economy such oversight has implications for development this paper seeks to demonstrate that the long run efficacy of industrial strategy depends upon designing appropriate economic governance structures that serve the wider public interest it does so by exploring past experiences of industrial strategy drawing lessons from the usa the uk japan the third italy and the emerging and transition economies we also offer some suggestions for ways forward

unimprovable allocations in economies with incomplete information abstract the paper considers an exchange economy with incomplete information in which agents can retrade goods until all gains from trade are exhausted unimprovable allocations are defined to be those allocations from which agents would not wish to deviate either by retrading goods or by revealing further information the concept of unimprovability is then used to analyze a lemons market and an adverse selection insurance market in which agents can renegotiate after information has been revealed finally unimprovability is compared to different concepts of efficiency and to the concept of durability journal of economic literature classification number d82

purchasing sleeping patents to curtail budget padding abstract this paper provides an explanation for sleeping patents based not on their ability to deter external competitors but rather on their ability to discipline actions of the firm s employees by acquiring a patent upfront a firm is able to issue a credible threat that it will switch technologies if a manager s cost budget for the existing technology is too high this threat reduces the manager s propensity to pad budgets

information incentives and organizational mode we examine the choice of organizational mode for a two stage production process wherein cost realizations at each stage are observed only by the producing party when these costs are positively correlated the principal prefers to undertake second stage production herself when the correlation is negative and sufficiently small she will prefer that the agent who performs the first stage also perform the second for large negative correlation either mode might be preferred when costs are uncorrelated the principal is indifferent between modes

economic reform and dynamic political constraints in this paper we examine the impact of political constraints on economic reform plans with special reference to the transition from centrally planned to market economies we analyse the problem of an agenda setting reform minded government facing a bureaucracy or industrial sector for which allocative efficiency requires redundancies and an increase in work intensity the government also tries to minimize the rents conceded to its heterogeneous workforce we examine two types of political constraints unanimity rule and majority rule both in a one period and a two period horizon the main results are the following first of all we show how adverse selection and time consistency may generate the widely observed feature of gradualism as an ingredient of an optimal reform second under a majority rule it is shown to be possible for the government to obtain a majority vote for a reform scheme that intertemporally hurts majority interests indeed the government can improve rent extraction through the strategic use of the threat of future proposals the group which expects to be in the minority tomorrow may accept concessions while its votes can be used to extract rents from another group these results suggest that in a dynamic context democratic constraints should not be overestimated as an obstacle against efficiency enhancing economic reforms the results of this paper may throw some light on the political economy of current reforms in eastern europe governments and political decision makers in general always face political constraints when elaborating reform proposals they know that the need to overcome potential opposition from various groups of the population constrains proposals for change political constraints vary depending on the specific institutional structure of society and are clearly different under a military dictatorship than under a parliamentary democracy the role of political constraints seems particularly important in eastern europe today where new democratic governments face the huge task of achieving the transition to a market economy while the introduction of democracy may have removed some important obstacles to economic change namely the veto power of a powerful nomenclatura under communist one party rule fears are expressed that it could potentially jeopardize economic reforms which may during the transition period hurt a majority of the population what can economic theory tell us about optimal economic reform under political constraints this paper starts addressing this ambitious question by looking at structural reform focusing on a restructuring of economic sectors which requires massive redundancies and a significant rise in labour productivity our model illustrates the case of planning

optimal contracts when enforcement is a decision variable this paper analyzes choice theoretic costly enforcement in an intertemporal contracting model with a differentially informed investor and entrepreneur an intertemporal contract is modeled as a mechanism in which there is limited commitment to payment and enforcement decisions the goal of the analysis is to characterize the effect of choice theoretic costly enforcement on the structure of optimal contracts the paper shows that simple debt is the optimal contract when commitment is limited and costly enforcement is a decision variable theorem 1 in contrast stochastic contracts are optimal when agents can commit to the ex ante optimal decisions theorem 2 the paper also shows that the costly state verification model can be viewed as a reduced form of an enforcement model in which agents choose payments and strategies as part of a perfect bayesian nash equilibrium

self reinforcing agglomerations an empirical industry study we test for the existence of endogenous agglomeration forces using structural econometric models after showing generally how to establish the existence of agglomeration forces empirically we undertake an industry study of the maritime industry in norway the results suggest that there are significant economies of scale in the maritime industry these economies of scale are mainly found in sub groups of a set of nine maritime industries this indicates that the maritime industry consists of two self reinforcing agglomerations but that there are few mechanisms actually keeping the two together jel classification c33 d24 o47 r11 r12

the influence of economics articles on business research analysis of journals and time trends this article examines the influence of economics on business research using citation data the share of economics in citations from business is 10 78 until 1995 but only 6 95 for 1996 2003 four potential explanations for this decline are discussed interdisciplinary spillover of research is slower than within a discipline the increasing use of mathematics in economics made economics less useful for business scholars economics articles are by their nature more long lived than business articles business has grown recently more quickly than economics the data support the second and fourth explanations different research spillover occurs but lasts no more than two years

the journals of economics we examine the principal journals of economics with particular attention to the communication between journals as reflected by the network of interjournal citations during 1987 90 and the changes over the past century in the characteristics of the authors and the techniques they have used the numerical results and those of the statistical modeling of these results reinforce the importance of economic theory as an exporter of intellectual influence to applied economics the study includes an examination of the degree of specialization among different subfields of economics a statistical model is presented for measuring the flow of intellectual influence as measured by citations in terms of simple univariate scores

profiting from agglomeration evidence from the salmon aquaculture industry asche f roll k h and tveteras r profiting from agglomeration evidence from the salmon aquaculture industry regional studies even though most celebrated clusters seem to be in high cost areas many econometric studies represent agglomeration externalities as increased primal productivity or reduced cost while this certainly can be consistent with some observed agglomeration effects it may be insufficient for the growth of a cluster the key condition for this is that profitability is higher the paper tests for agglomeration effects using a profit function approach this may be particularly important for firms in high cost clusters where revenue effects can be as important as productivity and cost effects the paper tests for both intra and inter industry agglomeration externalities using firm level data

renegotiation design with multiple regulators abstract one striking feature of the internal organization of governments is the existence of multiple regulators this paper explains this organizational choice as coming from the government s limited ability to commit the separation of powers between two regulators is modeled as a stackelberg common agency game with respect to the case of a single regulator the allocative efficiency and the regulated firm s informational rent are both reduced in the unique equilibrium of this game however when regulators have a limited ability to commit this static cost of regulators separation becomes a dynamic benefit separation makes renegotiation harder and improves commitment journal of economic literature classification numbers d82 l51

towards an economic theory of incentives in just in time manufacturing abstract just in time manufacturing is widely acknowledged as decreasing the costs of production but also as increasing the quality this is surprising we would expect that adding a constraint on the supplier that production be conducted at very specific times would induce a decrease in quality this paper argues that this paradox can be solved by noticing that the incentives of the buyer are changed by jit manufacturing he will be more willing to impose penalties on the supplier