The evolution of contracting: evidence from the US freight rail industry

Abstract Although they lie at the very foundation of economic exchange, the primal questions of whether and when economic actors employ contracts and how the propensity to contract evolves over time have received relatively little empirical attention. We address these lacunas using an extensive database of spot market and contract shipments in the US freight rail industry. We find that the evolution of contracting is driven by many factors, including legislative changes, contracting experience, the extent and nature of prevailing competition, transaction complexity, asset specificity, and technological change (JEL L22, L24, L51, L92).