Rothschild Lecture: What do we agree on when we disagree? Forward contracts with private forecasts

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• Eddie Anderson (University of Sydney)
• Monday 29 April 2019, 16:00-17:00
• Seminar Room 1, Newton Institute.

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MESW03 - Closing workshop: Looking forward to 2050

Forward
contracts are used for hedging purposes when firms operate in a spot market.
What will happen when firms have different views on the future distribution of
prices and are risk averse? We discuss different ways in which two firms may
agree on a bilateral forward contract: either through direct negotiation using
the ideas of a Nash bargaining solution, or through a broker. We discuss a type
of equilibrium in which each firm offers a supply function linking quantities
and prices, and the clearing price and quantity for the forward contracts are
determined from the intersection. Each firm may also be able to use the offer
of the other firm to augment its own information about the future price.

This talk is part of the Isaac Newton Institute Seminar Series series.

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