Abstract

http://ssrn.com/abstract=473942
 
 

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Long-Term Contracting and Multiple-Price Systems


R. Glenn Hubbard


Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER)

Robert J. Weiner


George Washington University - Department of International Business

July 1991

NBER Working Paper No. w3782

Abstract:     
This paper examines product markets in which long-term contracts and spot transactions coexist. Such markets are characterized by "multiple-price systems," wherein adjustment to supply and demand shocks occurs through spot prices, while contract prices are fixed, or adjust slowly. We derive the existence of contracts, as well as the equilibrium fraction of spot trade, in the framework of an optimizing model, and analyze the effects of shocks on market equilibrium when some buyers and sellers are "locked in" contractually. The model is employed to interpret the change in the copper market from a multiple-price system to one characterized solely by spot trade.

Number of Pages in PDF File: 36

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Date posted: July 3, 2007  

Suggested Citation

Hubbard, R. Glenn and Weiner, Robert J., Long-Term Contracting and Multiple-Price Systems (July 1991). NBER Working Paper No. w3782. Available at SSRN: http://ssrn.com/abstract=473942

Contact Information

Robert Glenn Hubbard (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
HOME PAGE: http://www.gsb.columbia.edu/faculty/ghubbard

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert Jonathan Weiner
George Washington University - Department of International Business ( email )
2023 G Street NW
Washington, DC 20052
United States
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