What Do "Facilitating Practices" Facilitates? 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.
(This abstract was borrowed from another version of this item.)
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||1993|
|Date of revision:|
|Contact details of provider:|| Postal: PENNSYLVANIA STATE UNIVERSITY, DEPARTMENT OF ECONOMICS, UNIVERSITY PARK PENNSYLVANIA 16802 U.S.A.|
Web page: http://econ.la.psu.edu/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:fth:pensta:10-93-2. 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: (Thomas Krichel)
If references are entirely missing, you can add them using this form.