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implicit contract


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An understanding between parties on acceptable forms of behaviour that is not part of any formal agreement. Implicit contracts arise in many social situations and have been proposed as an explanation of labour market institutions. Implicit contracts usually develop over time and represent trust between parties. For example, it has been suggested that Coca Cola has an implicit contract with its consumers not to alter the formulation of its standard cola product.

Subjects: Social sciencesEconomics


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