Do firms sell forward for strategic reasons? An application to the wholesale market for natural gas
Remco van Eijkel,
Gerard Kuper () and
José L. Moraga-González
International Journal of Industrial Organization, 2016, vol. 49, issue C, 1-35
Cournot models of oligopolistic interaction in forward and spot markets have shown that firms may sell forward for risk-hedging reasons only, or for both risk-hedging and strategic considerations. Using data from the Dutch wholesale market for natural gas where we observe the number of players, spot and forward sales, churn rates and prices, this paper presents evidence that strategic reasons play an important role at explaining the observed firms’ hedging activity. Our test for strategic behavior is based on the theoretical relationship between the number of sellers and the incentives to sell forward: if risk-hedging is the only motive behind firms’ decision to sell forward, then hedging activity ought to decrease in the number of firms; otherwise, if strategic reasons are relevant, then firms incentives to sell forward should increase in the number of competitors.
Keywords: Forward contracts; Risk-hedging; Strategic contracting; Market power; Spot market; Churn rates (search for similar items in EconPapers)
JEL-codes: D43 L13 G13 L95 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:49:y:2016:i:c:p:1-35
Access Statistics for this article
International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal
More articles in International Journal of Industrial Organization from Elsevier
Series data maintained by Dana Niculescu ().