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

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

Smallholder Participation in Agricultural Value Chains: Comparative Evidence from Three Continents

Supermarkets, specialized wholesalers, and processors and agro-exporters’ agricultural value chains have begun to transform the marketing channels into which smallholder farmers sell produce in low-income economies. We develop a conceptual framework through which to study contracting between smallholders and a commodity-processing firm. We then conduct an empirical meta-analysis of agricultural value chains in five countries across three continents (Ghana, India, Madagascar, Mozambique, and Nicaragua). We document patterns of participation, the welfare gains associated with participation, reasons for non-participation, the significant extent of contract non-compliance, and the considerable dynamism of these value chains, as farmers and firms enter and exit frequently.

Long-term vs. Short-term Contracts; A European perspective on natural gas

This paper analyses the economics of long-term gas contracts under changing institutional conditions, mainly gas sector liberalisation. The paper is motivated by the increasingly tense debate in continental Europe, UK and the US on the security of long-term gas supply. We discuss the main issues regarding long-term contracts, i.e. the changing role of the flexibility clause, the effect of abandoning the destination clause, and the strategic behaviour of producers between long-term sales and spot-sales. The literature suggests consumers and producers benefit from risk hedging through long-term contracts. Furthermore long-term contracts may reduce exercise of market power. This was argued to benefit consumers at the ‘expense’ of producers’ profits. Our analysis shows if the long-run demand elasticity is significantly lower than the short-run elasticity, both strategic producers and consumers benefit from lower prices and larger market volume. Some policy implications of the findings are also discussed

Supply Chain Management and the Changing Structure of U.S. Organic Produce

Replaced with revised version of paper 08/31/06.supply chain, produce, organic, vertical coordination, Agribusiness,

Trust and Contracting in Agri-Food Hybrid Structures

The paper aims at examining the hypothesis that the influence of trust on contract can be thought of as a dynamic factor of organizational choices in supply chains. The relationship between contract and trust is delineated on the basis of institutional environment, contractual incompleteness, safeguards and restrictive provisions. The interaction between individual and system elements in the formation of trust and its influence in hybrid contracting is considered. According to a New Institutional Economics approach and a theoretical framework is proposed. Empirical evidence is provided by a case study regarding an Italian retailer company establishing hybrid structure with its suppliers. Investments in suppliers selection provide the basis for trust supporting relationships which economize on negotiating and litigation costs.hybrid structures, trust, contract, Agribusiness, Q13, D23,

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

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.asset specificity, econometric analysis, long-term contracts, natural gas

Vertical Contracting When Competition for Orders Precedes Procurement

This paper reverses the standard order between input supply negotiations and downstream competition and assumes that competition for orders takes place prior to procurement of inputs in a vertical chain. In an environment where procurement negotiations involve no private information and no restrictions on the form of pricing, it is found that oligopolistically competitive outcomes will result despite the presence of an upstream monopolist. It is demonstrated that vertical integration is a means by which the monopolist can leverage its market power downstream to the detriment of consumers. However, it does so, not by foreclosing on independent downstream firms, but by softening the competitive behaviour of its own integrated units. Thus, the paper provides a simple rationale for anti-competitive vertical integration in an environment that respects the usual Chicago school assumptionsvertical contracting, vertical integration, monopolisation, bargaining, competition

Overview and classification of coordination contracts within forward and reverse supply chains

Among coordination mechanisms, contracts are valuable tools used in both theory and practice to coordinate various supply chains. The focus of this paper is to present an overview of contracts and a classification of coordination contracts and contracting literature in the form of classification schemes. The two criteria used for contract classification, as resulted from contracting literature, are transfer payment contractual incentives and inventory risk sharing. The overview classification of the existing literature has as criteria the level of detail used in designing the coordination models with applicability on the forward and reverse supply chains.Coordination contracts; forward supply chain; reverse supply chain

Trust, Contracting, and Adaptation in Agri‐Food Hybrid Structures

The paper considers the relationship between trust and governance structure from a Transaction Cost Economics perspective. The role of trust in the coordinating decisions is variously conceptualized according to the theoretical view adopted by the scholars. The present study adopt the three‐level schema introduced by Williamson (1996) and suggest that determinants of trust may operate both at institutional and governance structure level. The analytical framework depicted maintains that trust may determine a reduction of ex post transaction cost in the adaptation of hybrid structure. As a consequence trust appears to be able to extend the range of existence of the hybrids. The empirical part of the study is dedicated to a case study which illustrates the emerging of conditional trust (Fritz et al., 2008) and the role of trust in the adaptation process.hybrid, conditional trust, adaptation, contractual relationship., Food Consumption/Nutrition/Food Safety, Food Security and Poverty, Industrial Organization, Research Methods/ Statistical Methods,

Quality and inclusion of small producers in value chains: a theoretical note.

This paper develops a formal theory of the endogenous process of the introduction of high quality products in developing countries. Initial differences in income and capital and transaction costs are shown to affect the emergence of and the size of the high quality economy. Initial differences in the production structure and the nature of transaction costs – as well as the possibility of contracting between producers and processors – are shown to determine which producers are included in the high quality economy, and which not.