Opportunistic Behaviour in Subcontracting with Asset Specificity and Asymmetric Information: the Interwar British Road-haulage Industry

This paper examines the nature of subcontracting in the interwar road haulage industry. This new industry was dominated by very small-sclae hauliers, requiring a market-making intermediary to arrange full and return loads so as to avoid capacity underutilisation and the duplication of services. Freight clearing houses rapidly emerged to fulfil this role, subcontracting business to independent hauliers. However, many subcontractors found that they had entered contracts that strongly favoured the clearing houses.