Incentive issues in inter-firm relationships

Abstract This paper discusses the incentive problems to which buyer-supplier transactions are subject and, by surveying the incentives literature, discusses some of the inter-firm design instruments that can be used to mitigate these problems. Most of the literature discussed is based on the incomplete contracting model, which is better suited to analyzing inter-firm issues. We also discuss some of the managerial accounting issues which are raised by this literature and suggest some managerial accounting issues for further research.

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