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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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  • Chuanlong Tang
  • Sumner J. La Croix

    ()
    (Department of Economics, University of Hawaii at Manoa)

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:hai:wpaper:199314

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  1. 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.
  2. 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, vol. 21(2), pages 297-326, October.
  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. Oliver Hart & Bengt Holmstrom, 1986. "The Theory of Contracts," Working papers 418, Massachusetts Institute of Technology (MIT), Department of Economics.
  5. R. Glenn Hubbard & Robert J. Weiner, 1990. "Efficient Contracting and Market Power: Evidence from the U.S. Natural Gas Industry," NBER Working Papers 3502, National Bureau of Economic Research, Inc.
  6. 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, vol. 34(1), pages 69-99, April.
  7. 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.
  8. 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.
  9. Williamson, Oliver E, 1983. "Credible Commitments: Using Hostages to Support Exchange," American Economic Review, American Economic Association, vol. 73(4), pages 519-40, September.
  10. 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.
  11. 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.
  12. 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.
  13. Goldberg, Victor P & Erickson, John R, 1987. "Quantity and Price Adjustment in Long-term Contracts: A Case Study of Petroleum Coke," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 369-98, October.
  14. 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.
  15. 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.
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