Spatial Economics Seminar Amsterdam

Speaker(s)
Corrado Di Maria (University of East Anglia, United Kingdom)
Date
Thursday, 19 January 2017
Time
12:15-13:15
Venue
Tinbergen Institute Amsterdam, room 1.01AmsterdamNetherlands
Contact person(s)
Steven Poelhekke

We study how market deregulation affects the upstream industry both theoretically and empirically. Our theory predicts that firms respond to increases in uncertainty due to deregulation by writing more rigid contracts with their suppliers. Using the restructuring of the U.S. electricity market as our case study, we find support for our theoretical predictions. Our findings imply a greater emphasis on efficiency at coal mines contracting with restructured plants. The evidence suggests a 17% improvement in productivity at these mines, relative to those contracting with regulated plants. We find, on the other hand, that transaction costs may have increased. We conclude that deregulation has significant impacts upstream from deregulated markets.