Premium
The Supply and Demand of Marketing Contracts under Risk
Author(s) -
Buccola Steven T.
Publication year - 1981
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1240541
Subject(s) - deliverable , risk aversion (psychology) , forward contract , supply and demand , microeconomics , decision maker , contract management , business , willingness to pay , economics , expected utility hypothesis , marketing , financial economics , futures contract , management , management science
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.