Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 10

Last year, a 10-year contract between Boeing Commercial Airplane Group (BCAG) and Thyssen Inc.-a distributor of raw aluminum-expired. The contract, valued at $300 million when initially signed, stemmed from Boeing's desire in the late 1990s to reduce production bottlenecks resulting from supply shortages. Declines in the demand for commercial aircraft during the past decade led some analysts to challenge BCAG's wisdom in signing such a long-term contract. Do you share this view? Explain.