A look upstream: Market restructuring, risk, procurement contracts and efficiency

Corrado Di Maria, Ian Lange and Emiliya Lazarova

International Journal of Industrial Organization, 2018, vol. 57, issue C, 35-83

Abstract: We study how market deregulation affects the upstream industry both theoretically and empirically. Our theory predicts that firms respond to increases in uncertainty due to deregulation by writing more rigid contracts with their suppliers. Using the restructuring of the U.S. electricity market as our case study, we find support for our theoretical predictions. Our findings imply a greater emphasis on efficiency at coal mines contracting with restructured plants. The evidence suggests a 17% improvement in productivity at these mines, relative to those contracting with regulated plants. We find, on the other hand, that transaction costs may have increased. We conclude that deregulation has significant impacts upstream from deregulated markets.

Keywords: Coal use; Energy; Electricity market restructuring; Procurement contracts; Efficiency; Transaction costs (search for similar items in EconPapers)
JEL-codes: L14 L51 Q31 Q35 Q48 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:57:y:2018:i:c:p:35-83

DOI: 10.1016/j.ijindorg.2017.12.007

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