Contractual hazards and long-term contracting: a TCE view from the petroleum industry

Edward F. Sherry and David Teece

Industrial and Corporate Change, 2004, vol. 13, issue 6, 931-951

Abstract: We use the tools of transaction cost economics ('TCE') and economic analysis more generally to analyze the provisions of a long-term multi-million-dollar contract in the petroleum industry, the 35 year Field Contractors Agreement signed in 1965 for the development of a major oil field just offshore from Long Beach, California. There is a substantial public record regarding the deliberations that ultimately led to the choice of contract terms. That record makes it possible to identify how various TCE-based and related economic concerns--about dealing with information impactedness and restricting the scope for opportunistic behavior-- affected the choice of contractual provisions. As such, this case study provides useful insights into the relevance of TCE. Copyright 2004, Oxford University Press.

Date: 2004
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