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Opportunistic Behavior and Legal Disputes in the Chilean Electricity Sector

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In this paper I analyze post-contractual disputes in the newly privatized electricity sector in Chile. I discuss the presumption that opportunistic behavior and disputes arise due to inadequate market design, ambiguous regulation, and institutional weaknesses. I also assess the presumption that a large number of legal (public) disputes are inhibited by the nonexistence of institutions able to verify and enforce contracts. An in-depth analysis of 6 cases of open con‡ict provides support to such presumptions and highlights the crucial role of an adequate (preprivatization) market design. In addition, it concludes that the reduced number of open con‡icts observed in Chile is probably due to institutional weaknesses, which induces the parties to use private con‡ict resolution mechanisms.

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Paper provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its series ILADES-Georgetown University Working Papers with number inv130.

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Handle: RePEc:ila:ilades:inv130

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  1. Jean-Jacques Laffont & Jean Tirole, 1991. "Privatization and Incentives," Working papers 572, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
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  6. Janusz Ordover & Russell Pittman & Paul Clyde, 2001. "Competition Policy for Natural Monopolies in a Developing Market Economy," Industrial Organization 0111004, EconWPA.
  7. Klaus M. Schmidt, 1995. "Incomplete Contracts and Privatization," Discussion Paper Serie A 480, University of Bonn, Germany.
  8. Shapiro, C. & Willing, D.R., 1990. "Economic Rationales For The Scope Of Privatization," Papers 41, Princeton, Woodrow Wilson School - Discussion Paper.
  9. Gilbert,Richard J. & Kahn,Edward P. (ed.), 1996. "International Comparisons of Electricity Regulation," Cambridge Books, Cambridge University Press, number 9780521495905.
  10. Gal-Or, Esther, 1985. "First Mover and Second Mover Advantages," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 649-53, October.
  11. John Vickers & George Yarrow, 1988. "Privatization: An Economic Analysis," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262720116, December.
  12. Oliver Hart & John Moore, 1985. "Incomplete Contracts and Renegotiation," Working papers 367, Massachusetts Institute of Technology (MIT), Department of Economics.
  13. Spier, Kathryn E, 1992. "The Dynamics of Pretrial Negotiation," Review of Economic Studies, Wiley Blackwell, vol. 59(1), pages 93-108, January.
  14. Mark Armstrong & Simon Cowan & John Vickers, 1994. "Regulatory Reform: Economic Analysis and British Experience," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510790, December.
  15. Federico Basañes & Eduardo Saavedra & Raimundo Soto, . "Post-Privatization Renegotiations and Disputes in Chile," ILADES-Georgetown University Working Papers inv117, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  16. Sanford J. Grossman & Oliver D. Hart, 1980. "Takeover Bids, the Free-Rider Problem, and the Theory of the Corporation," Bell Journal of Economics, The RAND Corporation, vol. 11(1), pages 42-64, Spring.
  17. Eric Maskin & Jean Tirole, 1997. "Unforseen Contingencies, Property Rights, and Incomplete Contracts," Harvard Institute of Economic Research Working Papers 1796, Harvard - Institute of Economic Research.
  18. Eduardo Saavedra, . "Alternative Institutional Arrangements in Network Utilities: An Incomplete Contracting Approach," ILADES-Georgetown University Working Papers inv116, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
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Cited by:
  1. Ioannis N. Kessides, 2004. "Reforming Infrastructure : Privatization, Regulation, and Competition," World Bank Publications, The World Bank, number 13525, February.

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