What do Facilitating Practices Facilitate? An Empirical Investigation of Most-Favored-Nation Clauses in Natural Gas Contracts
Long-term contracts often include most-favored-nation clauses (MFNs), which are nondiscrimination guarantees that obligate a buyer or seller to treat all trading partners symmetrically in pricing decisions. Recent theoretical work has shown that such clauses can facilitate tacit collusion by increasing the cost of selective price changes aimed at attracting new business. An alternative view is that MFNs serve to facilitate efficient price adjustment in extended exchange relationships. We test these competing hypotheses using data from long-term natural gas contracts, many of which employ MFNs. Our conclusion is that the pattern of MFN adoption, in conjunction with the structure of the nondiscrimination regions and the parallels with other nonstrategic price escalation provisions, lends strong support to the efficiency rationale. Copyright 1994 by the University of Chicago.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:37:y:1994:i:2:p:297-322. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.