TRANSACTIONS COSTS AND THE GOVERNANCE OF COAL SUPPLY AND TRANSPORTATION AGREEMENTS

Transactions cost considerations can help explain why long-term contracts are used to arrange for the supply and transportation of coal to electric utilities. But transactions cost considerations, especially the idea of bounded rationality, also explain why contracts will be incomplete. Coal supply and transportation contracts provide ideal examples of bounded rationality; coal markets and railroad costs changed in the 1980s, in ways that were not anticipated in the long-term contracts that still governed supply and transport arrangements. The paper reviews the role of transactions costs considerations in driving contract choice for coal supply and transportation, shows how contracts signed during the 1970s were unable to flexibly react to later developments, and explores how utilities were able to obtain contract modifications with railroads and mineowners.

Language

  • English

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Filing Info

  • Accession Number: 00666276
  • Record Type: Publication
  • Files: TRIS
  • Created Date: Sep 26 1994 12:00AM