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The Role of Transaction-Specific Capital and Market Structure in Contracting: Evidence from Japan's Overseas Coking Coal Procurement

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Author Info
Chuanlong Tang
Sumner J. La Croix () (Department of Economics, University of Hawaii at Manoa)

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Abstract

Coking coal procurement by Japanese steel firms takes place within a framework of long-term contracts. We specify the determinants of price in a long-term contract and use an econometric model to investigate the effect of transaction-specific capital and market structure on contract price. The key finding is that both buyer concentration and transaction-specific capital have a significant impact on coking coal prices. Japanese steel firms also paid a price premium for contracts with larger dedicated quantities and longer duration. In contrast, to previous studies, the empirical analysis shows that coking coal prices are significantly affected by coal quality attributes.

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File URL: http://www.economics.hawaii.edu/research/workingpapers/88-98/WP_93-14.pdf
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Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 199314.

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Length: 45 pages
Date of creation: 1993
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Handle: RePEc:hai:wpaper:199314

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  1. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
  2. Paul L. Joskow, 1987. "Price Adjustment in Long Term Contracts: The Case of Coal," Working papers 444, Massachusetts Institute of Technology (MIT), Department of Economics.
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  3. Masten, Scott E & Meehan, James W, Jr & Snyder, Edward A, 1991. "The Costs of Organization," Journal of Law, Economics and Organization, Oxford University Press, vol. 7(1), pages 1-25, Spring.
  4. Goldberg, Victor P & Erickson, John R, 1987. "Quantity and Price Adjustment in Long-term Contracts: A Case Study of Petroleum Coke," Journal of Law & Economics, University of Chicago Press, vol. 30(2), pages 369-98, October.
  5. Hashimoto, Masanori, 1979. "Bonus Payments, on-the-Job Training, and Lifetime Employment in Japan," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 1086-1104, October. [Downloadable!] (restricted)
  6. Rogers, Christopher D. & Robertson, Kirsty & Robertson, Kirsty, 1987. "Long term contracts and market stability : The case of iron ore," Resources Policy, Elsevier, vol. 13(1), pages 3-18, March. [Downloadable!] (restricted)
  7. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September. [Downloadable!] (restricted)
  8. Paul L. Joskow, 1990. "The Performance of Long-Term Contracts: Further Evidence from Coal Markets," RAND Journal of Economics, The RAND Corporation, vol. 21(2), pages 251-274, Summer. [Downloadable!] (restricted)
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  9. Klein, Benjamin & Leffler, Keith B, 1981. "The Role of Market Forces in Assuring Contractual Performance," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 615-41, August. [Downloadable!] (restricted)
  10. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  11. Joskow, Paul L, 1987. "Contract Duration and Relationship-Specific Investments: Empirical Evidence from Coal Markets," American Economic Review, American Economic Association, vol. 77(1), pages 168-85, March. [Downloadable!] (restricted)
  12. Rodrik, Dani, 1982. "Managing resource dependency: The United States and Japan in the markets for copper, iron ore and bauxite," World Development, Elsevier, vol. 10(7), pages 541-560, July. [Downloadable!] (restricted)
  13. Hubbard, R Glenn & Weiner, Robert J, 1991. "Efficient Contracting and Market Power: Evidence from the U.S. Natural Gas Industry," Journal of Law & Economics, University of Chicago Press, vol. 34(1), pages 25-67, April.
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  14. Pisano, Gary P, 1989. "Using Equity Participation to Support Exchange: Evidence from the Biotechnology Industry," Journal of Law, Economics and Organization, Oxford University Press, vol. 5(1), pages 109-26, Spring.
  15. Crocker, Keith J & Masten, Scott E, 1991. "Pretia ex Machina? Prices and Process in Long-Term Contracts," Journal of Law & Economics, University of Chicago Press, vol. 34(1), pages 69-99, April.
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