Cover: Legal constraints on market response to supply disruptions

Legal constraints on market response to supply disruptions

Published 1982

by Fred Hoffman, David Seidman, John Haaga

Purchase Print Copy

 Format Price
Add to Cart Paperback66 pages $25.00

If an oil crisis suddenly disrupted the flow of oil to the United States, the task of allocating remaining supplies to domestic oil users could be left to the workings of intermediate and final goods markets. But legal constraints, especially those written into long-term contracts between firms in the oil industry, could make it difficult for private traders to reallocate supplies, preventing the market from efficiently distributing those supplies. This Note reports the results of an investigation into this issue. Based on an examination of representative contracts, cases, and statutes, the authors conclude that explicit contract provisions will not impede short-term efficiency of markets in a crisis. However, they find that certain features of the structure and organization of the oil industry, such as long-term, "quasi-contractual" relationships between firms, joint ventures, and large fixed investments, could provide firms with incentives that conflict with the goal of short-term efficiency in emergency allocations.

This report is part of the RAND note series. The note was a product of RAND from 1979 to 1993 that reported other outputs of sponsored research for general distribution.

This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited; linking directly to this product page is encouraged. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial purposes. For information on reprint and reuse permissions, please visit

RAND is a nonprofit institution that helps improve policy and decisionmaking through research and analysis. RAND's publications do not necessarily reflect the opinions of its research clients and sponsors.