Speculation on Primary Commodities: The Effects of Restricted Entry
AbstractWe present a model of oligopolistic commodity speculation, in which a limited number of speculators practice non-cooperative storage in an infinite-horizon game. A significant technical difficulty due to the non-negative stock constraint is overcome, and a tractable sub-game perfect equilibrium is presented, in which it is shown that less is stored and prices are more volatile than under perfect competition. It turns out that a tax on consumption of the good would increase storage, stabilize prices, increase welfare and raise speculative profits; the oligopolists would thus lobby for a tariff raised against their own shipments. Copyright 1999 by The Review of Economic Studies Limited.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 66 (1999)
Issue (Month): 4 (October)
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Other versions of this item:
- McLaren, J., 1992. "Speculation on Primary Commodities: The Effects of Restricted Entry," Discussion Papers 1992_37, Columbia University, Department of Economics.
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- Sebastien Mitraille & Henry Thille, 2008.
"Monopoly Behaviour with Speculative Storage,"
0804, University of Guelph, Department of Economics and Finance.
- Jean-Paul Chavas, 2008. "On Storage Behavior Under Imperfect Competition, with Application to the American Cheese Market," Review of Industrial Organization, Springer, vol. 33(4), pages 325-339, December.
- Bask, Mikael & Widerberg, Anna, 2008.
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Working Papers in Economics
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- Bask, Mikael & Widerberg, Anna, 2009. "Market structure and the stability and volatility of electricity prices," Energy Economics, Elsevier, vol. 31(2), pages 278-288, March.
- Singer, Marcos & Donoso, Patricio, 2008. "Upstream or downstream in the value chain?," Journal of Business Research, Elsevier, vol. 61(6), pages 669-677, June.
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