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Agency Frictions and Procurement: New Evidence from U.S. Electricity Restructuring

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  • Jose Miguel Abito
  • Jin Soo Han
  • Jean‐François Houde
  • Arthur A. van Benthem

Abstract

This article presents new quantitative evidence of the sources of efficiency benefits from deregulation. We estimate the heterogeneous effects of plant divestitures on fuel procurement costs during the restructuring of the U.S. electricity industry. Guided by economic theory, we focus on three mechanisms and find that restructuring reduced fuel procurement costs for firms that (i) were not subject to earlier incentive‐regulation programs, (ii) had relatively strong bargaining power as coal purchasers after restructuring, and (iii) were locked in with disadvantaged coal contracts prior to restructuring.

Suggested Citation

  • Jose Miguel Abito & Jin Soo Han & Jean‐François Houde & Arthur A. van Benthem, 2024. "Agency Frictions and Procurement: New Evidence from U.S. Electricity Restructuring," Journal of Industrial Economics, Wiley Blackwell, vol. 72(1), pages 20-48, March.
    • Handle: RePEc:bla:jindec:v:72:y:2024:i:1:p:20-48
    DOI: 10.1111/joie.12346
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    References listed on IDEAS

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