Pulp Friction: The Value of Quantity Contracts in Decentralized Markets

J. Tolvanen, Olivier Darmouni, Simon Essig Aberg
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Abstract

Firms in decentralized markets often trade using quantity contracts, agreements that specify quantity in advance of trade. We show that firms use quantity contracts to reduce the costs of trading frictions. Specifically, quantity contracts are valuable for two reasons. First, they increase trade between high surplus trading partners because they lock in trade prior to the point of sale. Second, they provide quantity insurance -- we show that buyers and sellers are endogenously risk averse with respect to quantity. However, quantity contracts are costly due to their inflexibility to market conditions. Using proprietary invoice data from a large seller, we estimate a model of quantity contracts in the pulp and paper industry. We find that the median value of a quantity contract is 10% of net price. The median value would be 25% lower without quantity insurance and 84% higher without the cost of inflexibility. As trading frictions diminish, the seller uses fewer quantity contracts and profits increase.
纸浆摩擦:分散市场中数量契约的价值
分散市场中的公司通常使用数量合同进行交易,即在交易前明确数量的协议。我们发现企业使用数量合同来降低贸易摩擦的成本。具体来说,数量合同的价值有两个原因。首先,它们增加了高顺差贸易伙伴之间的贸易,因为它们在销售点之前锁定了贸易。其次,它们提供数量保险——我们表明,买家和卖家在数量方面都是内生的风险厌恶者。然而,数量合同的成本很高,因为它们对市场条件缺乏灵活性。使用来自大型卖家的专有发票数据,我们估计了纸浆和造纸行业数量合同的模型。我们发现数量合同的中位数是净价的10%。如果没有数量保险,中位数会低25%,如果没有缺乏灵活性的成本,中位数会高84%。随着贸易摩擦的减少,卖方使用的数量合同减少,利润增加。
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