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Minimum Bill Contracts: Theory and Policy

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  • Masten, Scott E

Abstract

This 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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  • Masten, Scott E, 1988. "Minimum Bill Contracts: Theory and Policy," Journal of Industrial Economics, Wiley Blackwell, vol. 37(1), pages 85-97, September.
    • Handle: RePEc:bla:jindec:v:37:y:1988:i:1:p:85-97
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    Cited by:

    1. Benito Arruñada & Manuel González, 1997. "How competition controls team production: The case of fishing firms," Economics Working Papers 261, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Christian Hirschhausen & Anne Neumann, 2008. "Long-Term Contracts and Asset Specificity Revisited: An Empirical Analysis of Producer–Importer Relations in the Natural Gas Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 131-143, March.
    3. Yukseltan, Ergun & Yucekaya, Ahmet & Bilge, Ayse Humeyra & Agca Aktunc, Esra, 2021. "Forecasting models for daily natural gas consumption considering periodic variations and demand segregation," Socio-Economic Planning Sciences, Elsevier, vol. 74(C).
    4. Harish Krishnan & Roman Kapuscinski & David A. Butz, 2010. "Quick Response and Retailer Effort," Management Science, INFORMS, vol. 56(6), pages 962-977, June.
    5. Neuhoff, K. & von Hirschhausen, C., 2005. "Long-term vs. Short-term Contracts; A European perspective on natural gas," Cambridge Working Papers in Economics 0539, Faculty of Economics, University of Cambridge.
    6. Crocker, Keith J & Lyon, Thomas P, 1994. "What do Facilitating Practices Facilitate? An Empirical Investigation of Most-Favored-Nation Clauses in Natural Gas Contracts," Journal of Law and Economics, University of Chicago Press, vol. 37(2), pages 297-322, October.
    7. Anne Neumann & Sophia Rüster & Christian von Hirschhausen, 2015. "Long-Term Contracts in the Natural Gas Industry: Literature Survey and Data on 426 Contracts (1965-2014)," Data Documentation 77, DIW Berlin, German Institute for Economic Research.
    8. Raul V. Fabella, 2016. "Why Fixed Rent Contracts are Less Prevalent: Weak Third Party Enforcement and Endogenous Principal Type," UP School of Economics Discussion Papers 201606, University of the Philippines School of Economics.
    9. STEPHEN J. DeCANIO, 1990. "Cross‐Contract Crediting Under Ferc Order 500," Contemporary Economic Policy, Western Economic Association International, vol. 8(2), pages 159-175, April.
    10. Joseph C. Mullin & Wallace P. Mullin, 1996. "United States Steel's Acquisition of the Great Northern Ore Properties: Vertical Foreclosure or Efficient Contractual Governance?," NBER Working Papers 5662, National Bureau of Economic Research, Inc.
    11. 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.
    12. Navajas, Fernando H., 2008. "Infrastructure integration and incomplete contracts: natural gas in the Southern Cone," MPRA Paper 31025, University Library of Munich, Germany.
    13. repec:dau:papers:123456789/5372 is not listed on IDEAS
    14. Ergun Yukseltan & Ahmet Yucekaya & Ayse Humeyra Bilge & Esra Agca Aktunc, 2020. "Forecasting Models for Daily Natural Gas Consumption Considering Periodic Variations and Demand Segregation," Papers 2003.13385, arXiv.org.

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