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Transaction Costs, Hold-Ups and Governance in Ethanol Supply Chains

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  • Hobbs, Jill E.
  • Weseen, Simon
  • Kerr, William A.

Abstract

The long-run commercial viability of ethanol production depends on the ability to access an inexpensive and reliable supply of inputs as well as finding stable markets for ethanol and its co-products. A unique feature of ethanol plants is their position at the intersection of multiple supply chains which result in the production of grain products, livestock, and fuel (blended gasoline). The primary feedstock for first generation ethanol production is cereal grain (corn or wheat), while output from ethanol plants include not only ethanol for fuel, but also co-products used in livestock feeding. Transaction Cost Economics provides a lens through which to examine the juxtaposition of the multiple supply chain relationships that characterize the business environment for an ethanol plant. This paper examines the supply chain relationships in the Canadian ethanol industry within a transaction cost context. Sources of transaction costs and hold-up are identified, and inferences are drawn for the types of governance structures that may emerge in the long-run.

Suggested Citation

  • Hobbs, Jill E. & Weseen, Simon & Kerr, William A., 2012. "Transaction Costs, Hold-Ups and Governance in Ethanol Supply Chains," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 125158, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae12:125158
    DOI: 10.22004/ag.econ.125158
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    References listed on IDEAS

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