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I study a repeated principal-agent game with long-term output contracts that can be renegotiated at will. Actions are observable but not contractible, so they can only be incentivized through implicit agreements formed in equilibrium. I show that contract renegotiation is a powerful tool for incentive provision, despite the stationarity of the environment. Continuation contracts are designed to punish deviations in noncontractible behavior. If the equilibrium actions are observed, these contracts are renegotiated away. This form of anticipated renegotiation results in welfare improvements over outcomes attainable by one-period contracts or by long-term contracts that are not renegotiated. When the principal is not protected by limited liability, first-best outcomes are attainable regardless of the impatience of the players. Equilibrium strategies are shown to satisfy various concepts of renegotiation-proofness.

We study capital structure negotiation and cost of debt financing between sponsors and lenders using a sample of more than 1,000 project finance loans worth around US$195 billion closed between 1998 and 2003. We find that lenders: (i) rely on the network of nonfinancial contracts as a mechanism to control agency costs and project risks, (ii) are reluctant to price credit more cheaply if sponsors are involved as project counterparties in the relevant contracts, and finally (iii) do not appreciate sponsor involvement as a contractual counterparty of the special purpose vehicle when determining the level of leverage.

Electric vehicles (EVs) have excellent demand response potential, but a single type of demand response is difficult to fully utilise the dispatching potential of EVs. To improve the utilisation of the demand response potential of EVs, this study proposes two kinds of dispatching strategies for electric vehicle aggregator (EVA) combined price‐based and incentive‐based demand response: long‐term contract strategy and short‐term contract strategy. The difference of the two strategies depends on the length of time for EV users to sign incentive agreements with EVA. The long‐term contract strategy assumes that some EV users sign a long‐term incentive agreement with the EVA. The short‐term contract strategy takes an EV charging process as the dispatching cycle. The objective of maximising revenues and minimising load fluctuation of EVA is optimised in two strategies. An improved multi‐objective particle swarm optimisation algorithm that combines region selection strategy and grouping strategy is used to solve the problem. The simulation results show that the two dispatching strategies can improve the comprehensive benefits of EVA as well as EV users. The two dispatching strategies can effectively improve the utilisation of dispatching potential of EVs.

Against the backdrop of the full market integration of renewable energy, determining a reasonable proportion between medium- and long-term (MLT) contracts and spot trading has become a core issue in power market reform. Current Chinese policy requires that the share of MLT contracts should not be less than 90%, which helps ensure system security but may suppress the price discovery function of the spot market and limit renewable energy integration. This paper constructs a three-layer model: the first layer describes spot market clearing through Direct Current Optimal Power Flow (DC-OPF), yielding system energy prices and nodal prices; the second layer models bilateral contract decisions between generators and users based on Nash bargaining, incorporating risk preferences via a mean–variance framework; and the third layer introduces two evaluation indicators—contract penetration rate and economic proportion—and applies outer-layer optimization to search for the optimal contract ratio. Parameters are calibrated using coal prices, wind speed, solar irradiance, and load data, with numerical solutions obtained through Monte Carlo simulation and convex optimization. Results show that increasing the share of spot trading enhances overall system efficiency, primarily because renewable energy has low marginal costs and high supply potential, thereby reducing average market prices and mitigating volatility. Simulations indicate that the optimal contract coverage rate may exceed the current policy lower bound, which would expand spot market space and promote renewable energy integration. Sensitivity analysis further reveals that fuel price fluctuations, renewable output, load structure, and risk preferences all affect the optimal proportion, though the overall conclusions remain robust. Policy implications suggest moderately relaxing the constraints on MLT contract proportions, improving contract design, and combining this with transmission expansion and demand response, in order to establish a more efficient and flexible market structure.

We explore a major European competition decision, the 2012–18 Gazprom case, using a global gas market simulation model. We find that access to LNG markets alone is insufficient to counterbalance Gazprom’s strategic behaviour; central and eastern Europe (CEE) needs to be well interconnected with bidirectional flow capability. ‘Swap deals’ created by the decision facilitate CEE market integration, while limiting Gazprom’s potential market power. Such deals may increase the diversity of contracted gas and number of market players, but do not improve physical supply diversity. In the next five years, swap deals could marginally impact negatively the utilization of strategic assets in CEE, but since Gazprom’s commitments expire by mid-2026, utilization of these strategic assets may fall considerably, especially if Gazprom withholds supplies. As an unintended consequence, CEE markets may disintegrate from the rest of Europe. Avoiding such outcomes will require further gas market reforms, particularly, market design for gas transportation.

Power systems with increasing shares of wind and solar power generation have higher capital costs and lower operational costs than power systems based on fossil fuels. This increases the importance of the financing costs for total system cost. We quantify how renewable energy support policies can affect the financing costs by addressing regulatory risk and facilitating hedging. We use interview data on wind power financing costs from the EU and model how long-term contracts signed between project developers and energy suppliers impact financing costs. Regression analysis of investors’ financing costs and an analytical model of off-takers financing costs reveal that between the support policies, the costs of renewable energy deployment differ by around 30 percent, but can be significantly lower or higher, depending on the financial situation of energy suppliers.

Purpose The purpose of this paper is to examine the supervening loss of inter-organisational trust in long-term commercial contracts. The underlying research question is whether contract law – the legal institution regulating economic exchanges – should intervene and enable a party to a long-term commercial contract to extricate itself from a situation where a relationship of trust has broken down irretrievably. Design/methodology/approach This paper uses doctrinal methodology and theoretical conceptualisation to answer the underlying research question. The legal instrument chosen for analysis purposes is the UNIDROIT Principles of International Commercial Contracts. This paper also draws on extant literature on inter-organisational trust (including conceptual and empirical studies) to support the arguments and propositions. Furthermore, this study proceeds to assess the substantive justifiability of the proposed remedial measure using four normative values: legal certainty and predictability, protection of the performance interest, economic efficiency and the preservation of the relation. Findings The central argument put forward in this paper is the reformulation of draft Article 6.3.1 proposed by the UNIDROIT Working Group on Long-Term Contracts, which confers a novel right to terminate for a compelling reason. This paper presents a multidimensional model of inter-organisational trust that would serve as the conceptual framework for the proposed reformulation of the provision and establishes a coherent juridical basis for the legal solution that would accord with the Principles of International Commercial Contracts’ general remedial scheme. As for the normative assessment, this paper demonstrates that the proposed remedial measure would significantly promote efficient outcomes and positively serve the norms of legal certainty, protection of the performance interest and the preservation of the relation. Originality/value This paper addresses the lacuna in current legal scholarship in relation to the adverse socio-economic effects following trust violation and deterioration in inter-organisational relationships. Additionally, the propositions and findings should contribute to the workings of the UNIDROIT in adopting new rules and principles that would serve the special requirements of cross-border trade.

Abstract—The article analyzes the real-time crisis in the EU natural gas market. It is shown that the crisis began in mid-2021, mainly due to omissions by regulators who set the energy transition too fast and made a mistake when assessing liquidity in the physical gas market. By refusing to conclude long-term contracts for the import of natural gas and opting for the spot market, the EU has made itself dependent on unpredictable price fluctuations for raw materials. The EU seeks at all costs to build a spot market for natural gas, the price of which is determined by the current balance of supply and demand. This goal was set because, within the framework of the climate and energy strategy of the European Union, the gas market is increasingly subordinated to servicing the electricity market. Since the spring of 2022, the development of the EU gas market has moved into a system of coordinates set by political interests and energy security considerations. The main long-term structural shifts in the European gas market were: firstly, an accelerated reorientation to LNG imports; secondly, the strengthening of the downward trend in demand; thirdly, the transition of gas prices to a higher level. Higher gas prices push up electricity prices, allowing governments to mobilize the additional financial resources needed to accelerate the green and energy transition. The forced restructuring of the European gas market and the electricity market launched the process of deindustrialization of the industrial core of the EU. The threat of deindustrialization is forcing EU member states to look for ways of non-market support for national industry, which, in principle, can push centrifugal tendencies in the EU.

This article deconstructs mobile phone contracts as an example of long-term contractual relations in four jurisdictions to reveal that there are three elements which define consumer protection. The elements are contract duration, renewal of the agreement and unilateral modification. Each of these factors are regulated differently in each of the jurisdictions, but, assessed collectively, similar levels of consumer protection are found. The authors show that the reason for the different weighting is determined by regulation (subject-specific or general); by external factors, such as technological development, geography or business considerations; and by wider cultural considerations. The comparison of these features across the jurisdictions shows that, ultimately, regulatory intervention plays little role in contract design, unless an overwhelming policy goal is pursued, which means that, in most cases, regulators would be advised to avoid or reduce regulation of mobile phone and other long-term contracts.

We examine a model of long-term contracting in which the buyer is privately informed about the stochastic process by which her value for a good evolves. In addition, the realized values are also private information. We characterize a class of environments in which the profit-maximizing long-term contract offered by a monopolist takes an especially simple structure: we derive sufficient conditions on primitives under which the optimal contract consists of a menu of deterministic sequences of static contracts. Within each sequence, higher realized values lead to greater quantity provision; however, an increasing proportion of buyer types are excluded over time, eventually leading to inefficiently early termination of the relationship. Moreover, the menu choices differ by future generosity, with more costly (up front) plans guaranteeing greater quantity provision in the future. Thus, the seller screens process information in the initial period and then progressively screens across realized values so as to reduce the information rents paid in future periods.