TY  - JOUR
AU  - Hubbard,R. Glenn
AU  - Weiner,Robert J.
TI  - Efficient Contracting and Market Power: Evidence from the U.S. Natural  Gas Industry
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3502
PY  - 1990
Y2  - November 1990
UR  - http://www.nber.org/papers/w3502
L1  - http://www.nber.org/papers/w3502.pdf
N1  - Author contact info:
R. Glenn Hubbard
Graduate School of Business
Columbia University, 101 Uris Hall
3022 Broadway
New York, NY  10027
Tel: 212/854-3493
Fax: 212/864-6184
E-Mail: rgh1@columbia.edu, ws2187@columbia.edu

Robert Weiner
Int'l Business Dept.
George Washington University
2023 G St., NW
Washington, DC 20052
E-Mail: rweiner@gwu.edu
AB  - It is well recognized by economists that long-term contracting under an array of price and non-price provisions may be an efficient response to small-numbers bargaining problems. Empirical work to distinguish such issues from predictions of models of market power and bargaining has been sparse, principally because the necessary data on individual transactions are seldom publicly available.  The U.S. natural gas industry is well suited for such tests both because of the small number of buyers (pipelines) and sellers (producers) in each market and the large capital commitments required of transacting parties at the inning of the contract. We present a model of the bilateral bargaining process is natural gas field markets under uncertainty. We identify the 'initial price' as the outcome of the bargaining aver a fixed payment for pipeline to producer, and describe "price-escalator provisions" as a means of making the contract responsive at the margin to changes in the valuation of gas over the term of the agreement. Our econometric work rakes use of a large, detailed data set on during the l950s. Empirical evidence from models of price determination and the use of most-favored-nation clauses is supportive of the theoretical model.
ER  -