Managing Relational Contracts

Abstract Relational contracts are typically modeled as being between a principal and an agent, such firm owner supplier. Yet, in variety of organizations, relationships overseen by intermediary manager. Such arrangements open the door for collusion manager agent. This paper develops theory managed relational contracts. We show that differ from principal–agent ones important ways. First, kickbacks agent can help solve manager’s commitment problem. When is difficult, this result higher effort than could incentivize directly. Second, making more valuable enables hence reduce effort. also analyze principal’s delegation problem she may or not benefit entrusting relationship to