Contractual form and market thickness in trucking

A central proposition of the transaction costs literature is that firms wil l substitute more complicated contractual arrangements for simple spot arra ngements when transactions involve relationship-specific investments, I inv estigate this proposition by testing whether simple spot arrangements are l ess common when local trucking markets are thin., I find that doubling the thickness of the market increases the likelihood that simple spot arrangeme nts govern transactions by about 30% for long hauls. I find weaker evidence of relationships between local market thickness and contractual form for s hort hauls-hauls for which quasi-rents are particularly small. Contracts pr otect quasi-rents over a surprisingly large range, but they play a less imp ortant role as quasi-rents decrease.