Advanced Search
MyIDEAS: Login to save this article or follow this journal

Contract renegotiation and rent re-distribution: Who gets raked over the coals?

Contents:

Author Info

  • Kosnik, Lea
  • Lange, Ian

Abstract

Policy shocks affect the rent distribution in long-term contracts, which can lead to such contracts being renegotiated. We seek an understanding of what aspects of contract design, in the face of a substantial policy shock, affect the propensity to renegotiate. We test our hypotheses using data on U.S. coal contracts after the policy shock of the 1990 Clean Air Act Amendments. Contracts are divided into two categories, those that were renegotiated following the shock and those that were not. Characteristics of the contract are used to explain whether or not the contract was ultimately renegotiated. Results provide guidance on rent re-distribution and contract renegotiation more generally and are applicable to contemporary policy issues such as climate change legislation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S009506961100057X
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Journal of Environmental Economics and Management.

Volume (Year): 62 (2011)
Issue (Month): 2 (September)
Pages: 155-165

as in new window
Handle: RePEc:eee:jeeman:v:62:y:2011:i:2:p:155-165

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/622870

Related research

Keywords: Contract renegotiation Coal contracts Acid rain;

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Williamson, Oliver E, 1999. "Public and Private Bureaucracies: A Transaction Cost Economics Perspective," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 15(1), pages 306-42, April.
  2. Anne Neumann & Christian von Hirschhausen, 2006. "Long-Term Contracts and Asset Specificity Revisited – An Empirical Analysis of producer-Importer Relations in the Natural Gas Industry," Working Papers, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research 0610, Massachusetts Institute of Technology, Center for Energy and Environmental Policy Research.
  3. Joskow, Paul L, 1985. "Vertical Integration and Long-term Contracts: The Case of Coal-burning Electric Generating Plants," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 1(1), pages 33-80, Spring.
  4. Georg Noldeke & Klaus M. Schmidt, 1995. "Option Contracts and Renegotiation: A Solution to the Hold-Up Problem," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 26(2), pages 163-179, Summer.
  5. Meghan R. Busse & Nathaniel O. Keohane, 2007. "Market effects of environmental regulation: coal, railroads, and the 1990 Clean Air Act," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 38(4), pages 1159-1179, December.
  6. Curtis Carlson & Dallas Burtraw & Maureen Cropper & Karen L. Palmer, 2000. "Sulfur Dioxide Control by Electric Utilities: What Are the Gains from Trade?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 108(6), pages 1292-1326, December.
  7. Saussier, Stephane, 2000. "Transaction costs and contractual incompleteness: the case of Electricite de France," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 42(2), pages 189-206, June.
  8. Mulherin, J Harold, 1986. "Complexity in Long-term Contracts: An Analysis of Natural Gas Contractual Provisions," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 2(1), pages 105-17, Spring.
  9. Joe Kerkvliet & Jason F. Shogren, 2001. "The Determinants of Coal Contract Duration for the Powder River Basin," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 157(4), pages 608-, December.
  10. Guasch, J. Luis & Laffont, Jean-Jacques & Straub, Stéphane, 2008. "Renegotiation of concession contracts in Latin America: Evidence from the water and transport sectors," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 26(2), pages 421-442, March.
  11. Victor P. Goldberg, 1976. "Regulation and Administered Contracts," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 7(2), pages 426-448, Autumn.
  12. Joskow, P.L., 1989. "The Performance Of Long Term Contracts: Further Evidence From Coal Market," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 517, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Mathias Dewatripont & Philippe Aghion & Patrick Rey, 1994. "Renegotiation design with unverifiable information," ULB Institutional Repository, ULB -- Universite Libre de Bruxelles 2013/9591, ULB -- Universite Libre de Bruxelles.
  14. John Swinton, 2004. "Phase I Completed: An Empirical Assessment of the 1990 CAAA," Environmental & Resource Economics, European Association of Environmental and Resource Economists, European Association of Environmental and Resource Economists, vol. 27(3), pages 227-246, March.
  15. Keith J. Crocker & Scott E. Masten, 1988. "Mitigating Contractual Hazards: Unilateral Options and Contract Length," RAND Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 19(3), pages 327-343, Autumn.
  16. Hardman Moore, John & Hart, Oliver, 1985. "Incomplete Contracts and Renegotiation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 60, C.E.P.R. Discussion Papers.
  17. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, American Economic Association, vol. 73(4), pages 519-40, September.
  18. Paul L. Joskow, 1987. "Price Adjustment in Long Term Contracts: The Case of Coal," Working papers, Massachusetts Institute of Technology (MIT), Department of Economics 444, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Crocker, Keith J & Masten, Scott E, 1991. "Pretia ex Machina? Prices and Process in Long-Term Contracts," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 34(1), pages 69-99, April.
  20. Rogerson, William P, 1992. "Contractual Solutions to the Hold-Up Problem," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 59(4), pages 777-93, October.
  21. Lange Ian & Bellas Allen S, 2007. "The 1990 Clean Air Act and the Implicit Price of Sulfur in Coal," The B.E. Journal of Economic Analysis & Policy, De Gruyter, De Gruyter, vol. 7(1), pages 1-25, August.
  22. Aghion, Philippe & Dewatripont, Mathias & Rey, Patrick, 1994. "Renegotiation Design with Unverifiable Information," Scholarly Articles 12375014, Harvard University Department of Economics.
  23. Gil, Ricard, 2007. ""Make-or-buy" in movies: Integration and ex-post renegotiation," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 25(4), pages 643-655, August.
  24. Sotkiewicz, Paul M. & Holt, Lynne, 2005. "Public Utility Commission Regulation and Cost-Effectiveness of Title IV: Lessons for CAIR," The Electricity Journal, Elsevier, Elsevier, vol. 18(8), pages 68-80, October.
  25. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 21(2), pages 297-326, October.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Corrado Di Maria & Ian Lange & Edwin van der Werf, 2012. "Should We Be Worried About the Green Paradox? Announcement Effects of the Acid Rain Program," Working Papers, Fondazione Eni Enrico Mattei 2012.49, Fondazione Eni Enrico Mattei.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:jeeman:v:62:y:2011:i:2:p:155-165. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.