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The Determinants of Coal Contract Duration for the Powder River Basin

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  • Joe Kerkvliet
  • Jason F. Shogren

Abstract

We examine coal contract duration using data on utility coal buyers and supplying mines in the Powder River Basin. Duration determinants are (1) measures of buyers' and sellers' transaction-specific investments and (2) trading and market experience. The results largely support transaction-cost theory. As theory predicts, duration is positively influenced by the mines' physically specific investments in reserves and the utilities' investments in coal-specific generating units. Contrary to theory, the mines' dedicated capacities negatively influence duration. Duration decreases with increasing prior experience between trading pairs and with the experience gained by utilities as mines demonstrated their ability to consistently deliver quality fuel.

Suggested Citation

  • 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, vol. 157(4), pages 608-608, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200112)157:4_608:tdoccd_2.0.tx_2-0
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    References listed on IDEAS

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    1. Coase, R H, 1992. "The Institutional Structure of Production," American Economic Review, American Economic Association, vol. 82(4), pages 713-719, September.
    2. Scott E. Atkinson & Joe Kerkvliet, 1986. "Measuring the Multilateral Allocation of Rents: Wyoming Low-Sulfur Coal," RAND Journal of Economics, The RAND Corporation, vol. 17(3), pages 416-430, Autumn.
    3. Acheson, James M, 1985. "The Maine Lobster Market: Between Market and Hierarchy," Journal of Law, Economics, and Organization, Oxford University Press, vol. 1(2), pages 385-398, Fall.
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    Cited by:

    1. repec:eee:indorg:v:57:y:2018:i:c:p:35-83 is not listed on IDEAS
    2. Matthew Ellman, 2006. "The optimal length of contracts with application to outsourcing," Economics Working Papers 965, Department of Economics and Business, Universitat Pompeu Fabra.
    3. Kosnik, Lea & Lange, Ian, 2011. "Contract renegotiation and rent re-distribution: Who gets raked over the coals?," Journal of Environmental Economics and Management, Elsevier, vol. 62(2), pages 155-165, September.
    4. López-Bayón, Susana & González-Díaz, Manuel, 2010. "Indefinite contract duration: Evidence from electronics subcontracting," International Review of Law and Economics, Elsevier, vol. 30(2), pages 145-159, June.
    5. Kosnik, Lea-Rachel, 2014. "Determinants of contract completeness: An environmental regulatory application," International Review of Law and Economics, Elsevier, vol. 37(C), pages 198-208.
    6. Maria Kozhevnikova & Ian Lange, 2009. "Determinants of Contract Duration: Further Evidence from Coal-Fired Power Plants," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 34(3), pages 217-229, May.

    More about this item

    JEL classification:

    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

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