The Martingale evolution of price forecasts in a market for supply chain capacity

This is an extended abstract of a paper that was a finalist in the Manufacturing and Service Operations Management Society's 2003 Student Paper Competition. The impact of various parameters on the price forecast update is explored. It is found that as the rate of resolution of demand uncertainty increases, so does the rate of resolution of price uncertainty, and also that the supply chain cost parameters do affect the resolution of price uncertainty.