Abstract
IN two recent papers I examined the effects of relationship-specific investment on the duration of contracts negotiated between electric utilities and coal suppliers.' That work demonstrated that when relationshipspecific investment is important for a cost-minimizing supply relationship, contracts are frequently utilized that specify ex ante the terms and conditions of trade over many future years. In this article I examine the characteristics of the price-adjustment provisions specified in these long-term coal contracts. I utilize a sample of about 250 coal contracts to analyze the structure of formal price-adjustment provisions in coal contracts in order to determine the factors that affect initial negotiated contract prices and to examine actual transaction-price behavior over time. There has been much recent theoretical work, as well as some related empirical work, that has focused on the benefits of long-term contracts when relationship-specific investments are important.2 There has also been some theoretical work that focuses on the contractual arrangements that may be chosen to mitigate opportunism problems and guard against
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