Flexible supply contracts under price uncertainty

Stergios Fotopoulos (), X. Hu and C.L. Munson

European Journal of Operational Research, 2008, vol. 191, issue 1, 253-263

Abstract: This article develops supply contracts covering environments with changing prices. We investigate characterization properties of the price processes, while considering costs and discount factors. We determine expressions of the contract's expected low price and its second moment for a given horizon. We then employ these expected price and second moment values to identify an expected optimum time before the contract expires at which the lowest price occurs. Simulation experiments verify our analysis, and they illustrate how the optimum purchase time decreases as the drift term increases.

Date: 2008
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:191:y:2008:i:1:p:253-263

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