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

Corrado Di Maria (Lead Author), Ian Lange, Emiliya Lazarova

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)
10 Downloads (Pure)

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.
Original languageEnglish
Pages (from-to)35-83
JournalInternational Journal of Industrial Organization
Volume57
Early online date5 Jan 2018
DOIs
Publication statusPublished - Mar 2018

Keywords

  • Coal Use
  • Energy
  • Electricity Market Restructuring
  • Procurement Contracts
  • Efficiency
  • Transaction Costs

Cite this