Fuqiang Zhang is the Dan Broida professor of Supply Chain, Operations, and Technology (SCOT) at Olin Business School, Washington University in St. Louis. He also serves as the SCOT area chair and academic director of MBA programs at Olin. Professor Zhang obtained his Ph.D. in Managerial Science and Applied Economics from the Wharton School, University of Pennsylvania. His research interests focus on supply chain and technology innovation, consumer analytics in operations management, and sustainable operations. In recent years, he has been working on research topics that are driven by empirical data. Professor Zhang\u2019s research has appeared in top-tier academic journals such as Management Science, Manufacturing & Service Operations Management, Operations Research, Marketing Science, and Production and Operations Management.<\/p>\n"}],"event_agenda":false,"event_photo_gallery":false,"event_presentations":false,"event_custom_heading":[{"event_custom_title":"Abstract","event_custom_details":"
This paper studies two competing firms\u2019 choices between the contingent-price contract (CPC) and fixed-price contract (FPC) in global commodity procurement. The FPC price is determined when signing the contract, whereas the CPC price is pegged to an underlying index and remains open until the delivery date. Under both contracts, each firm determines its order quantity based on the updated belief about the market demand. The unrealized CPC price correlates with the market demand, allowing a firm to update its belief about the CPC price using demand information, thereby generating a price-learning effect. We find that, contrary to conventional wisdom, a larger price volatility could benefit the firms, and, under differentiated contracts, a firm might benefit from the improvement of forecast accuracy at its rival. We further show that the price-learning effect plays a critical role in the firms\u2019 contract choices. First, significant price volatility forces the firms to pursue the responsiveness of the CPC. Second, the firms may adopt differentiated contracts to enhance their responses to market changes and dampen competition, and a higher competition intensity more likely leads to contract differentiation. Third, the firms in a small market seek responsiveness and contract differentiation rather than cost efficiency. This study reveals the bright side of price volatility and takes a step toward understanding the effect of two-dimensional information updating.<\/p>\n"}],"event_enquiry_details":{"event_enq_full_name":"","event_enq_department":"","event_enq_email":"","event_enq_telephone":"","event_enq_website":""}}]