Transaction Cost Economics and Contract Duration : An Empirical Analysis of EDF Coal Contracts

This paper studies duration of inter-firm contracts in a transaction cost perspective. The aim of the paper is to test the proposition that can be derived from a transaction-cost framework. We built a non-truncated database representing the entire contractual relationships of Electricité de France (EDF) with its coal carriers and coal unloaders over the period 1977 -1997. Section I explores factors that can explain the choice of contract duration. Section II describes the relationships between EDF and its suppliers. In section III, we test and confirm most propositions derived from transaction-cost theory that relate contract duration to transaction characteristics. We believe this study to be the first attempt (1) to confirm transaction cost economics propositions using French data and (2) to endogenize asset specificity level at stake in transactions.