Asymmetric Competition in B2B Spot Markets

Abstract

We model a spot market in a make-to-stock industry with two types of suppliers: A type 1 supplier faces stochastic contracted demand and has access to the spot market for liquidating surplus, while a type 2 supplier produces only for the spot market. We find the production quantity equilibrium when the market consists of one supplier of each type and determine which supplier benefits more from the existence of the spot market and from an increase in spot market's demand. In addition, we analyze how the behavior of the supplier with contracts effects the performance of the supplier without contracts.

Keywords: Supply chain, Spot-market, B-to-B e-commerce