A Look Upstream: Market Restructuring, Risk, Procurement Contracts and Efficiency

Di Maria, Corrado, Lange, Ian and Lazarova, Emiliya (2018) A Look Upstream: Market Restructuring, Risk, Procurement Contracts and Efficiency. International Journal of Industrial Organization, 57. pp. 35-83. ISSN 0167-7187

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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.

Item Type: Article
Uncontrolled Keywords: coal use,energy,electricity market restructuring,procurement contracts,efficiency,transaction costs
Faculty \ School: Faculty of Social Sciences > School of Economics
Depositing User: Pure Connector
Date Deposited: 08 Jan 2018 12:01
Last Modified: 08 Jul 2020 23:54
URI: https://ueaeprints.uea.ac.uk/id/eprint/65883
DOI: 10.1016/j.ijindorg.2017.12.007

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