Inventory, Speculation, and Sourcing Strategies in the Presence of Online Exchanges
We study how online business-to-business (B2B) exchanges affect buyer-supplier relationships where an exchange takes the role of a secondary market in which buyers (of the initial product) can trade excess inventory to address supply and demand imbalances. Over the last several years, B2B exchanges have attempted to provide supply for storable industrial goods with some degree of design specification (as opposed to undifferentiated commodities). Through this research, we elucidate some aspects of how speculative online exchanges with a small number of participants might behave and the impact they will have on the use of long-term contracts for supply. By endogenizing the evolution of spot prices in response to buyers' and their supplier's actions, we produce price fluctuations that exhibit significant autocorrelation in such markets. We show that participating buyers accrue network benefits as the number of participating firms increases through the inventory-pooling effects, resulting in reduced costs for them. However, a supplier acting strategically will counteract such benefits by restricting availability of goods to the spot market, sacrificing short-term spot-market revenue for long-term contract volume.
Volume (Year): 9 (2007)
Issue (Month): 3 (July)
|Contact details of provider:|| Postal: 7240 Parkway Drive, Suite 300, Hanover, MD 21076 USA|
Web page: http://www.informs.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Muermann, Alexander & Shore, Stephen H., 2006. "Strategic trading and manipulation with spot market power," CFS Working Paper Series 2006/07, Center for Financial Studies (CFS).
- Angus Deaton & Guy Laroque, 1990.
"On The Behavior of Commodity Prices,"
NBER Working Papers
3439, National Bureau of Economic Research, Inc.
- Chung-Lun Li & Panos Kouvelis, 1999. "Flexible and Risk-Sharing Supply Contracts Under Price Uncertainty," Management Science, INFORMS, vol. 45(10), pages 1378-1398, October.
- Seifert, Ralf W. & Thonemann, Ulrich W. & Hausman, Warren H., 2004. "Optimal procurement strategies for online spot markets," European Journal of Operational Research, Elsevier, vol. 152(3), pages 781-799, February.
- Wu, D. J. & Kleindorfer, P. R. & Zhang, Jin E., 2002. "Optimal bidding and contracting strategies for capital-intensive goods," European Journal of Operational Research, Elsevier, vol. 137(3), pages 657-676, March.
- Paul R. Kleindorfer & D. J. Wu, 2003. "Integrating Long- and Short-Term Contracting via Business-to-Business Exchanges for Capital-Intensive Industries," Management Science, INFORMS, vol. 49(11), pages 1597-1615, November.
- Eberly, Janice C. & Van Mieghem, Jan A., 1997. "Multi-factor Dynamic Investment under Uncertainty," Journal of Economic Theory, Elsevier, vol. 75(2), pages 345-387, August.
- D. J. Wu & Paul R. Kleindorfer, 2005. "Competitive Options, Supply Contracting, and Electronic Markets," Management Science, INFORMS, vol. 51(3), pages 452-466, March.
- Hau Lee & Seungjin Whang, 2002. "The Impact of the Secondary Market on the Supply Chain," Management Science, INFORMS, vol. 48(6), pages 719-731, June.
- Haresh Gurnani & Christopher S. Tang, 1999. "Note: Optimal Ordering Decisions with Uncertain Cost and Demand Forecast Updating," Management Science, INFORMS, vol. 45(10), pages 1456-1462, October.
- Gavirneni, Srinagesh & Morton, Thomas E., 1999. "Inventory control under speculation: Myopic heuristics and exact procedures," European Journal of Operational Research, Elsevier, vol. 117(2), pages 211-221, September.
- Panagiotis Kouvelis & Genaro J. Gutierrez, 1997. "The Newsvendor Problem in a Global Market: Optimal Centralized and Decentralized Control Policies for a Two-Market Stochastic Inventory System," Management Science, INFORMS, vol. 43(5), pages 571-585, May.
When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:9:y:2007:i:3:p:312-331. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc)
If references are entirely missing, you can add them using this form.