The Supply and Demand of Marketing Contracts under Risk

Steven T. Buccola

American Journal of Agricultural Economics, 1981, vol. 63, issue 3, 503-509

Abstract: Bernoullian decision theory is used to characterize a firm's willingness to purchase or sell a good under contract. Contract supply and demand functions are then specified in which willingness to contract is related to contract-pricing provisions, to decision maker risk aversion, to open market opportunities, and to other factors. On the basis of these relations, a theory of exchange is proposed which incorporates decision making under risk. Implications of the analysis differ by contract type; cost-plus and fixed-price forward deliverable contracts are emphasized.

Date: 1981
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