Choosing a transport contract over multiple periods
AbstractWe offer a shipper and a carrier the choice among three contracts in which to frame their relationship. Both can also take recourse in the transport spot market. Demand and price on the spot market are dependent exogenous stochastic processes. We model the outcome of this endogenous choice of contract. The results, given in closed form, are different from those presented in the literature. Using numeric instances, we show how a choice is made and which contract would be preferred. Comparison on the variance of the economic returns are offered. The conclusions are applicable when the carrier is not capacity constrained.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 18392.
Date of creation: 09 Jan 2009
Date of revision: 09 Jan 2009
Publication status: Published in International Journal Logistics Systems and Management 2-3.5(2009): pp. 273-322
transport; stochastic process; MPC; minimum purchase commitment; quantity flexibility; relational contract;
Find related papers by JEL classification:
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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