Mitigating Contractual Hazards: Unilateral Options and Contract Length

Keith J. Crocker and Scott Masten

RAND Journal of Economics, 1988, vol. 19, issue 3, 327-343

Abstract: In this article we consider the ways in which the desire for efficient, low-cost adaptation to change influences the tradeoff between the design and duration of long-term contractual relationships. We examine the distortions in contract terms occasioned by nonprice competition for natural gas in the presence of wellhead price regulation. Deviations from optimal contract incentives significantly raise the cost of being bound to long-term agreements and shorten the duration of contracts. The approach we adopt suggests a method for empirically assessing the efficiency of alternative contracting practices and legal standards.

Date: 1988
References: Add references at CitEc
Citations: View citations in EconPapers (130)

Downloads: (external link)
http://links.jstor.org/sici?sici=0741-6261%2819882 ... O%3B2-B&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rje:randje:v:19:y:1988:i:autumn:p:327-343

Ordering information: This journal article can be ordered from
https://editorialexp ... i-bin/rje_online.cgi

Access Statistics for this article

More articles in RAND Journal of Economics from The RAND Corporation
Bibliographic data for series maintained by ().