Thomas Blaschke, from the University of Salzburg’s Interfaculty Department of Geoinformatics – Z_GIS, is included in the new “Who’s Who” of the world’s most influential researchers.

Date: 30.11.2021 from 18:00 to 19:30 (online)

Title: Pulp Friction: The Value of Quantity Contracts in Decentralized Markets

Speaker: Juha Tolvanen (University of Vienna)

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.

Rector Hendrik Lehnert informs on behalf of the Rectorate of the University of Salzburg together with the chair team of the ÖH University of Salzburg, Laura Reppmann, Lara Simonitsch and Manuel Gruber, about the current COVID situation in Salzburg and the next steps at PLUS.