The Role of Transaction-Specific Capital and Market Structure in Contracting: Evidence from Japan's Overseas Coking Coal Procurement

Coking coal procurement by Japanese steel firms takes place within a framework of long-term contracts. 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 coal quality attributes.