Integrating Long-term and Short-term Contracting via Business-to-Business Exchanges for Capital-Intensive Industries

We analyze one of the most important phenomena of emerging B2B markets, their impact in promoting changes in contracting for the same goods traded on the B2B exchange. This trend is especially important in capital-intensive industries, where improvements in ne-tuning the coordination of supply and demand carry large economic bene ts. The spot market information conveyed through B2B transactions has become the basis in many of these markets for de ning options, terms of trade and contracting terms for long-term contracts that are benchmarked on the shortrun B2B transactions. This paper notes a broad set of goods and services currently being traded in both B2B short-run markets and longer-term contract markets, and reviews the economic and managerial frameworks that have been proposed to explain the structure of these markets and interdependent contracts. We provide several examples to illustrate the theoretical underpinnings, which derive from contract theory, auction theory and options theory. We then provide a framework based on transactions cost economics, codi ability in B2B exchanges and short-run and long-run competition to shed light on the nature of B2B exchanges in capital-intensive industries and their integration with contracting innovations that are being engendered by these exchanges. (B2B Exchange; Real Options; Long-Term Contracting; Capacity; Competitive Equilibrium; Codi ability)