CONTRACTING, CAPTIVE SUPPLIES, AND PRICE BEHAVIOR

Ming-Chin Chin and Robert Weaver

No 19052, 2002 Conference, April 22-23, 2002, St. Louis, Missouri from NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management

Abstract: Theoretical and simulation results clarify the role of procurement contracting in determining spot price levels and volatility. A generic model determines market share across quality. Actual supply is specified as price dependent and stochastic. Simulation examines the sensitivity of price level and volatility to extent of forward contracting, risk aversion, and ability to adjust spot market demand (recontracting). The results show that as forward contracting increases mean spot price decreases and variance increases. This effect increases as risk aversion decreases and as extent of recontracting adjustment in spot demand decreases.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 15
Date: 2002
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:ncrtwo:19052

DOI: 10.22004/ag.econ.19052

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