Chapter 4: Adaptation in long-term exchange relations: evidence of the complementarity and ancillarity of dimensions of electricity marketing contracts
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The research illuminates the role of financial structure (debt or equity financing) and contract renegotiation in enabling efficient adaptation over the course of long-term exchange.I provide evidence from a dataset of electricity marketing contracts about how electricity generators and electricity marketers use four instruments – contract duration, risk-sharing schemes, financial structure, and veto provisions – to channel investment incentives and to address both programmable and unprogrammable demands for contract adjustments.The empirical results demonstrate that veto provisions support long-term contracts by investing the governance of long-term relationships with flexibility in the ancillarity of other instruments that are consistent with efficient adaptation being an important economic problem.

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