Donors often rely on local intermediaries to deliver benefits to target beneficiaries. Each selected recipient observes if the intermediary under-delivers to them, so they serve as natural monitors. These recipients may, however, withhold complaints to ‘thank’ the intermediary for selecting...

This paper resolves three empirical puzzles in outsourcing by formalizing the adaptation cost of long-term performance contracts. Side-trading with a new partner alongside a long-term contract (to exploit an adaptation-requiring investment) is usually less effective than switching to the new...

Previous analysis has shown that traders may opt for specific technologies with no joint productivity advantage as a way to commit themselves to trading jointly, but only when long-term contracting is infeasible. This paper proves that specificity can also be optimal (by relaxing the...