هزینه های ریسک و عدم انجام معامله در بازارهای پیشرو آزمایشگاهی و لحظه ای
|کد مقاله||سال انتشار||مقاله انگلیسی||ترجمه فارسی||تعداد کلمات|
|7916||2003||18 صفحه PDF||سفارش دهید||محاسبه نشده|
Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Comparative Economics, Volume 31, Issue 2, June 2003, Pages 257–274
Traders choose to participate in forward or spot auctions having some probability of contract non-performance in the forward market with no associated real cost or with a transaction cost levied randomly on a forward trade. Results from laboratory markets suggest that the spot market becomes a backstop to failed units in the forward market. Forward market activity is particularly sensitive to increased transaction costs. An increase of about 6% for each trader shifts about 40% of all sales to a spot market. If institutions are ineffective in enforcing forward contracts, a spot outlet is essential for exchange to continue.
A market economy is dependent on working rules that serve to reduce costs associated with making transactions. Legal and economic institutions control the transaction costs of negotiating agreements and, once negotiated, determine the costs of enforcing such agreements Bromley, 1993 and Williamson, 1986. Weak institutions often lead to high transaction costs. Specifically, when contracts are difficult to arrange and when the legal system is not in place to provide effective enforcement, trading activity is likely to be restricted, creating inefficiencies in the market. Market infrastructure, e.g., legal procedures that enforce contracts and protect private property, is taken for granted in advanced market economies, but it may not exist or may be just developing in formerly planned economies. Market infrastructure does not evolve over a short period of time. In transition economies, dramatic political and economic changes increase instability so that it may take decades before the institutions can support market systems adequately. During these times, situations in which one or both parties may not fulfill previously agreed upon contractual obligations can be common. In the absence of an effective legal system, a party often can break a contract without being held responsible. Food markets developed rapidly in Russia; however, about 85% of milk producers, 75% of producers of vegetables, livestock, and grain, and 65% of sunflower producers indicated that they experienced cases of failure with state procurement organizations in 1995 (Sedova, 1996). Contractual obligations in Russian agricultural and food markets are not fulfilled, entirely or in part, because of exogenous forces rather than opportunism. A common cause of non-performance is a state procurement organization not receiving the expected funds from a state budget in a timely manner. Another cause comes from processors who cannot pay for inputs because downstream buyers are delinquent in their payments. Thus, parties incur additional costs to collect payments due. Gow and Swinnen (2001) provide a number of detailed examples of, and causes for, contract breaches in transition economies. The focus of this paper is on laboratory market outcomes resulting from contract non-performance in a forward auction market when the forward market is linked with a spot auction market. A good may be exchanged in the market according to two basic dynamics; either a producer may first produce the good and then sell it or a producer may contract with a buyer and then produce the good. The latter is referred to as production-to-demand (PTD) or a forward market (Carlton, 1989). The former is called advance production (AP) or a spot market; it is a cash market that requires relatively little contractual support for a transaction. Sellers in a cash market face a risk of inventory loss when storage is not feasible, e.g., perishable commodities, but they can reduce losses by trading at prices below unit cost. However, if inventory is not sold during a production period, the entire cost of production is lost. Hence, selling agents feel more secure trading in a forward market because revenues are known and they do not face risk of inventory loss that may occur in the spot market. Therefore, a forward market can be an important means of exchange, particularly for sellers. Phillips et al. (2001b) report that about 85% of the trades are forward in laboratory markets, when agents are given a choice of forward or spot trading. However, if a forward contract fails, the seller or buyer cannot honor the contract. Hence, will the forward market disappear at some threshold probability of non-performance risk with all trading moved to the spot market? Suppose that higher transaction costs in the forward market are related to non-performance or other costs of doing business in a transition economy. How do these costs affect prices and trading patterns when there are opportunities for both forward and spot sales? This paper indicates that the spot market plays a measurably important role in the face of forward non-performance problems. Our objective is to study market behavior in the presence of freely operating forward and spot auction markets and either there is some probability that a trading partner will not fulfill forward contractual obligations, thus causing contract failure, or there is a random transaction cost levied on the forward trade that both a buyer and seller must pay to complete the exchange. Laboratory markets are used because reported price and quantity data from open markets are often unreliable or lacking or contract price and quantity data are private information. In the presence of contract non-performance, field data are difficult to interpret because numerous interacting forces are causing changes in the basic market conditions. Laboratory markets allow us to control the trading environments so that we can measure how contract failure and increased transaction costs affect both market performance and the choice of a trading institution. An experimental approach can capture the impact of institutions and transaction costs without having to control for the many changing unobserved determinants of market activity in transition economies. The sequence of participation in our laboratory markets puts traders in the forward market first. At the end of this trading period, a production decision is made to cover the forward trades and to produce additional units for sale in the spot market. The spot market always requires advance production. After trading ends in the spot market, a new cycle begins for which there is no inventory carryover or storage. Hence, spot trading always follows the forward market; it backs up the forward institution and offers an alternative to uncertain or costly forward trading. However, forward contracts represent planned transactions and plans can fail or carry unforeseen transaction costs (Al-Najjar, 1995). We assume that contract non-performance in the forward market occurs randomly and is not determined endogenously by agents. This failure may be attributed to the general instability of the market and the supporting institutions. However, failure is not due to the actions of the trading agents so that it cannot influence a trader's reputation. Goods are homogenous and the market is competitive both ex ante and ex post. In our experimental design, producers learn of forward non-performance before spot units are produced. In the first scenario, there is some probability that a forward contract fails completely and the good is not transferred from the seller to the buyer so that the seller can resell it in the spot market. We assume that there are no direct costs associated with contract failure in this scenario but there is a potential inventory cost risk due to moving failed units from the forward market to the spot market. In the second scenario, there is some probability that performance of a forward contract may have an additional transaction cost to both a buyer and a seller implying that the trade is effectively taxed but no tax is applied in the spot market. The results from this experimental treatment provide a measure of the relative influences of costs associated with contract non-performance in the forward market and the risk of inventory cost in the spot market. Our laboratory experiments are consistent with transactions in the food sector and with other industries that cannot hold inventories for long periods, perhaps because styles or product technologies change rapidly or storage is not feasible. There is no inventory carryover across trading periods; in the case of food products, this is due to the perishability of the good. As another example, automobiles are sold in forward and spot markets because fleet sales are made before production and most retail sales are made spot. Inventory is costly and carryovers from one year to the next are few because of style and technical changes. The paper is organized as follows. Section 2 provides details of the experimental design and the underlying theory. The experimental methods and procedures are outlined in Section 3, followed by discussions of the methods of analysis and selected preliminary results. The results of the experiments are presented graphically and by convergence models in Section 5. The paper concludes with a brief summary and implications of the results for transition economies.
نتیجه گیری انگلیسی
This study investigates the effects of contract non-performance in a forward auction market, when the forward market is linked with a spot auction market. Without a threat of random contract failures or unforeseen transaction costs, the majority of all sales are forward trades. Results from laboratory markets suggest that the spot auction market has a substantial option value to traders, when the forward contract fails or a transaction tax is levied. If failed sales in the forward market can be moved to the spot auction, total linked sales remain surprisingly stable and market outcomes are near the competitive equilibrium. Trading activity in the forward market tends to dominate trading in the spot market, regardless of non-performance risk. The fact that trades are dominant in the forward market, even when the probability of contract failure is high, suggests that sellers consider the spot market as a secondary, but important outlet. Because of the inherent risk that comes from potential inventory loss, the spot market is not the primary market due to the risk to producers of holding a perishable commodity. Adding a random 12.5% individual transaction tax to forward units reduces both total trades and total earnings. The decrease in total earnings from the increased transaction cost occurs primarily at the expense of sellers; buyers seem to compensate effectively through purchases at a lower forward price. About half of the forward trade activity in this environment moves to the spot market. The degree of substitution is determined by sellers comparing the implicit cost of making a sale in the forward market and paying the random tax with the cost of selling in the spot market and increasing an inventory cost. These results indicate the need to develop viable spot auction markets in transition economies because public institutions are ineffective in enforcing contracts. The importance of this is highlighted by recognizing that transition economies undergo significant changes that foster contract non-performance. Reforms privatize and split vertically integrated chains into smaller, independent enterprises. Hence, these enterprises must purchase inputs and sell their product in the market through forward or spot delivery methods. Without a legal system to enforce contract agreements, the incidence of non-performance increases in a forward transaction. The spot market can be a necessary building block for forward market development. However, spot auction markets have been slow to develop in these countries (Brezinski and Fritsch, 1997). In the absence of public enforcement institutions and spot auction markets, private mechanisms have emerged to enforce contracts. For example, a Slovakian food processor helps upstream farms pay for production inputs (Gow and Swinnen, 2001). In so doing, the processor increases the costs of contractual breach, making it more likely that the contract will be honored. Farm losses from delayed payments by such processors will also be reduced. The simultaneous reduction of the likelihood of a hold-up by processors and of its costs to producers induces farms to increase contract-specific investments. However, farms often do not deliver the quality or quantity agreed in the contract leading to a breach. Producers may also use inputs on other crops or sell them. Therefore, considerable adjustment of contracts over time is often required, reinforcing a need for spot auction markets. In Russia, two additional consequences of weak spot auctions are observable. First, producers have integrated vertically into processing, resulting in a significant decrease in products delivered to independent firms so that only 30 to 40% of the total production capacity of these firms were used in 1997 (Khlystun, 1997). Functioning centralized spot markets could maintain and promote a disintegrated market environment and ultimately a more competitive industry. Second, because of the high transaction costs of exchange resulting from the lack of institutions to support centralized markets and the fragile economic climate, an incentive arises for intermediary firms to form. These firms broker products between producers of raw materials and processors and between processors and consumers or other intermediaries, e.g., wholesalers and retailers. While brokers serve a useful role when transaction costs are high, the added layers increase the price of final delivery.