Truland Building, 400
August 14, 2007, 08:00 PM to 07:00 PM
Post regulatory restructuring of the U.S. natural gas market in 1993, pipeline network investment decisions, once decided internally by pipeline planning departments, now depend on incremental contracts from pipeline transportation customers. Market incentives that impact customer capacity contracting decisions are crucial in determining investment in network infrastructure. Current federal regulatory policy allows for the resale of transportation capacity rights by pipeline customers but prohibits withholding transportation capacity off of the market. The present research uses the methods of experimental economics to examine the consequences of such policies on pipeline network investment and market profitability. Although not statistically significant, experimental results showed positive impacts on asset investment if subjects had capacity resale and withholding rights. However, average profitability was not impacted by withholding rights.