Author: Kerkvliet Joe Shogren Jason F.
Publisher: Mohr Siebeck
ISSN: 0932-4569
Source: Journal of Institutional and Theoretical Economics JITE, Vol.157, Iss.4, 2001-12, pp. : 608-622
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Abstract
We examine coal contract duration using data on utility coal buyers and supplying mines in the Powder River Basin. Duration determinants are (1) measures of buyers' and sellers' transaction-specific investments and (2) trading and market experience. The results largely support transaction-cost theory. As theory predicts, duration is positively influenced by the mines' physically specific investments in reserves and the utilities' investments in coal-specific generating units. Contrary to theory, the mines' dedicated capacities negatively influence duration. Duration decreases with increasing prior experience between trading pairs and with the experience gained by utilities as mines demonstrated their ability to consistently deliver quality fuel.
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