Minimum Bill Contracts: Theory and Policy
AbstractThis paper examines the efficiency implications of minimum bill cont racts, and concludes that minimum bill provisions promote rather than impede efficient adaptation to changing circumstances. In particular , minimum bills provide a simple mechanism by which parties faced wit h uncertain demand and rising marginal cost can approximate joint-pro fit maximizing payment schedules in transaction-specific relationship s governed by long-term contracts. The paper also questions the merit of proposals for legislative or regulatory intervention to reduce mi nimum bill obligations in natural gas contracts, and considers the ap propriate legal status of these provisions in the event of contractua l failure. Copyright 1988 by Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Industrial Economics.
Volume (Year): 37 (1988)
Issue (Month): 1 (September)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
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- Lisa J. Cameron, 2000. "Limiting Buyer Discretion: Effects on Performance and Price in Long-Term Contracts," American Economic Review, American Economic Association, vol. 90(1), pages 265-281, March.
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