Integrating Long-Term and Short-Term Contracting in Beef Supply Chains

Abstract

We analyze one of the most important phenomena of emerging B2B markets, their impact in promoting changes in contracting for the same goodstraded on the B2B exchange. This trend is especially important in capital-intensive industries, where improvements in ne-tuning the coordination of supply and demand carry large economic bene ts. The spot market information conveyed through B2B transactions has become the basis in many of these markets for de ning options, terms of trade and contracting terms for long-term contracts that are benchmarked on the shortrun B2B transactions. This paper notes a broad set of goods and services currently being traded in both B2B short-run markets and longer-term contract markets, and reviews the economic and managerial frameworks that have been proposed to explain the structure of these markets and interdependent contracts. We provide several examples to illustrate the theoretical underpinnings, which derive from contract theory, auction theory and options theory. We then provide a framework based on transactions cost economics, codi ability in B2B exchanges and short-run and long-run competition to shed light on the nature of B2B exchanges in capital-intensive industries and their integration with contracting innovations that are being engendered by these exchanges.

Advance booking discount in the presence of spot market

“…They find that a buyer, who uses spot markets, can offer a higher expected service level, but also experience a higher variability in profits than those who do not use spot market. Boyabatli, Kleindorfer, and Koontz (2011) examine the US beef supply chain in which a meat packer can source fed cattle through long-term-based window contracts and a spot market to produce two beef products. They find that higher variabilities can benefit the firm but decrease the reliance on the window contract.…”

Introduction to the Special Issue on Research at the Interface of Finance, Operations, and Risk Management (iFORM): Recent Contributions and Future Directions

“…For example, Boyabatlı et al (2011) considered a coproduction system with two output quality levels (boxed beef and ground beef) in a meat processing environment, and analyzed the impact of market conditions on optimal sourcing decisions. Dong et al (2014) analyzed early procurement, production, and upgrading decisions of an oil refinery facing price uncertainty in both input and output markets.…”

How Can Substitution and Complementarity Effects Be Leveraged for Broadband Internet Services Strategy?

“…This is the basis for how we will explain substitution and complementarity effects across the mobile and fixed broadband services. A typical approach is to use a cross-price elasticity estimation to demonstrate substitution or complementarity effects between two different products [4]. The use of this indicator is based on the assumption that a change in the quantity demanded is entirely due to a price change [8].…”