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Long-Term Contracts and Asset Specificity Revisited: An Empirical Analysis of Producer–Importer Relations in the Natural Gas Industry

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  • Christian Hirschhausen
  • Anne Neumann

Abstract

In this paper, we analyze structural changes in long-term contracts in the international trade of natural gas. Using a unique data set of 262 long-term contracts between natural gas producers and importers, we estimate the impact of different institutional, structural and technical variables on the duration of contracts. We find that contract duration decreases as the market structure of the industry develops to more competitive regimes. Our main finding is that contracts that are linked to an asset specific investment are on average four years longer than those who are not.
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  • Christian Hirschhausen & Anne Neumann, 2008. "Long-Term Contracts and Asset Specificity Revisited: An Empirical Analysis of Producer–Importer Relations in the Natural Gas Industry," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 32(2), pages 131-143, March.
    • Handle: RePEc:kap:revind:v:32:y:2008:i:2:p:131-143
    DOI: 10.1007/s11151-008-9165-0
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    More about this item

    Keywords

    Asset specificity; Econometric analysis; Contracts; Natural gas; Transaction costs; Institutions;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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