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Long-term contracts in resource goods trade : three essays

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Title: Long-term contracts in resource goods trade : three essays
Authors: Tang, Chuanlong
Issue Date: 1993
Abstract: Much of the trade in resource goods takes place within a framework of long-term contracts. There are many studies on long-term contracts in the U.S. energy industry. The main purpose of this study is to provide analyses of long-term contracts in the international resources trade. The sample of long-term contracts examined in this study consists of selected overseas coking coal procurement contracts negotiated by Japanese importers. This study is composed of three essays. In the first essay, we specify the determinants of price in a long-term contract and use an econometric model to investigate the effect of transaction-specific capital and market structure on contract price. The key finding is that both buyer concentration and transaction-specific capital have a significant impact on coking coal prices. Japanese steel firms also paid a price premium for contracts with larger dedicated quantities and longer duration. In contrast to previous studies, the empirical analysis shows that coking coal prices are significantly affected by major coal quality properties. The second essay examines in more detail the structure of long-term contracts and the price adjustment process. We find that there has been quite a strong move since the mid-1980s towards shorter term deals and that long-term contracts have become simply a means of structuring renegotiations over the terms of trade. The empirical analysis shows that the import prices paid by Japanese firms for coking coal were more stable than the domestic coking coal prices in its supplier countries. The third essay presents a model to explore a downstream firm's problem of procurement contract choice, i. e., procuring an input by itself or through trading companies. The model proposes that while the downstream firm is more effective in monitoring activity, the trading company is more effective in input searching activity - the trade-off between these two effects determining the downstream firm's choice of contracts. comparative results of the model are presented and are applied to explain the presence of Japanese trading companies in Japan's overseas resource goods procurement.
Description: Thesis (Ph. D.)--University of Hawaii at Manoa, 1993.
xii, 138 leaves, bound 29 cm
Rights: All UHM dissertations and theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission from the copyright owner.
Appears in Collections:Ph.D. - Economics

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