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Governance strategies and transaction costs in a renovated electricity market

Author

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  • Signorini, Guilherme
  • Ross, R. Brent
  • Peterson, H. Christopher
Abstract
This study applies a transaction cost economics (TCE) framework to examine how economic agents adopt governance strategies in Brazil's recently renovated electricity market. In light of a well-established TCE model, four attributes of transactions (i.e., asset-specificity, uncertainty, complexity, and frequency) are examined for three unregulated transactions between generating firms and final consumers. The qualitative analysis of attributes unfolds into a comparative analysis of theory-predicted governance strategies versus strategies observed in the marketplace. It is argued that Williamson's model continues to effectively predict the most efficient governance strategy in the sense of minimizing transaction costs and safeguarding idiosyncratic assets. Misalignment between theory predictions and observations, however, suggests that two additional concepts – implementability and reputation – must be examined alongside with Williamson's four attributes of transactions in order to better explain strategic decisions in Brazil's electricity market. Capital availability, existence of compatible partners, and reputation play crucial roles in explaining those decisions.

Suggested Citation

  • Signorini, Guilherme & Ross, R. Brent & Peterson, H. Christopher, 2015. "Governance strategies and transaction costs in a renovated electricity market," Energy Economics, Elsevier, vol. 52(PA), pages 151-159.
    • Handle: RePEc:eee:eneeco:v:52:y:2015:i:pa:p:151-159
    DOI: 10.1016/j.eneco.2015.10.009
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    Cited by:

    1. Aquila, Giancarlo & Rotela Junior, Paulo & de Oliveira Pamplona, Edson & de Queiroz, Anderson Rodrigo, 2017. "Wind power feasibility analysis under uncertainty in the Brazilian electricity market," Energy Economics, Elsevier, vol. 65(C), pages 127-136.
    2. Lundmark, Robert, 2022. "Time-adjusted transaction costs for energy renovations for single-family house-owners," Energy Economics, Elsevier, vol. 114(C).
    3. Cardinale, Roberto, 2019. "The profitability of transnational energy infrastructure: A comparative analysis of the Greenstream and Galsi gas pipelines," Energy Policy, Elsevier, vol. 131(C), pages 347-357.
    4. Garcia, Marli da Silva & Vilpoux, Olivier François & Cereda, Marney Pascoli, 2021. "Institutional arrangements in the commercialization of electric energy from sugarcane biomass in the Brazilian midwest," Revista de Economia e Sociologia Rural (RESR), Sociedade Brasileira de Economia e Sociologia Rural, vol. 59(3), January.

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    More about this item

    Keywords

    Power market; Utility; Deregulation; Intervention; Brazil;
    All these keywords.

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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