Recently, Air Liquide signed a long-term contract with Yan’an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group—one of China’s largest firms engaged in oil and natural gas exploration and production as well as oil refining. The new contract specifies that Air Liquide invest approximately 80 million euros in two air separation units (ASUs), which will supply air gases for Yan’an’s production of plastics. Air Liquide is a French multinational firm that supplies industrial gases to a wide range of industries, including chemical manufacturers. Why is a long-term contract preferable to a spot exchange or vertical integration between Yan’an and Air Liquide?

Recently, Air Liquide signed a long-term contract with Yan’an Energy and Chemical Co., a subsidiary of Yanchang Petroleum Group—one of China’s largest firms engaged in oil and natural gas exploration and production as well as oil refining. The new contract specifies that Air Liquide invest approximately 80 million euros in two air separation units (ASUs), which will supply air gases for Yan’an’s production of plastics. Air Liquide is a French multinational firm that supplies industrial gases to a wide range of industries, including chemical manufacturers. Why is a long-term contract preferable to a spot exchange or vertical integration between Yan’an and Air Liquide?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 7E

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