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Equilibrium storage with multiple commodities

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  • Nishimura, Kazuo
  • Stachurski, John

Abstract

This paper introduces a multisector model of commodity markets with storage, where equilibrium is defined by profit maximization, arbitrage and market clearing conditions. We then solve for the decentralized equilibrium via a corresponding dynamic program. We also describe the dynamics of the model, establishing geometric ergodicity, a Law of Large Numbers and a Central Limit Theorem.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Mathematical Economics.

Volume (Year): 45 (2009)
Issue (Month): 1-2 (January)
Pages: 80-96

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Handle: RePEc:eee:mateco:v:45:y:2009:i:1-2:p:80-96

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Web page: http://www.elsevier.com/locate/jmateco

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Keywords: Commodities Dynamic programming Stability;

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References

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  1. Benveniste, L M & Scheinkman, J A, 1979. "On the Differentiability of the Value Function in Dynamic Models of Economics," Econometrica, Econometric Society, Econometric Society, vol. 47(3), pages 727-32, May.
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  3. Eugenio S. A. Bobenrieth H. & Juan R. A. Bobenrieth H. & Brian D. Wright, 2002. "A Commodity Price Process with a Unique Continuous Invariant Distribution Having Infinite Mean," Econometrica, Econometric Society, Econometric Society, vol. 70(3), pages 1213-1219, May.
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  8. Scheinkman, Jose A & Schechtman, Jack, 1983. "A Simple Competitive Model with Production and Storage," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 50(3), pages 427-41, July.
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  10. Williams,Jeffrey C. & Wright,Brian D., 1991. "Storage and Commodity Markets," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521326162.
  11. Bryan Routledge & Duane Seppi & Chester Spatt, . "Equilibrium Forward Curves for Commodities," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 1997-49, Carnegie Mellon University, Tepper School of Business.
  12. Duffie, Darrell & Singleton, Kenneth J, 1993. "Simulated Moments Estimation of Markov Models of Asset Prices," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 929-52, July.
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  14. Roy Bailey and Marcus Chambers, . "A Theory of Commodity Price Fluctuations," Economics Discussion Papers, University of Essex, Department of Economics 432, University of Essex, Department of Economics.
  15. Stachurski, John, 2002. "Stochastic Optimal Growth with Unbounded Shock," Journal of Economic Theory, Elsevier, Elsevier, vol. 106(1), pages 40-65, September.
  16. Manuel S. Santos & Jesus Vigo-Aguiar, 1998. "Analysis of a Numerical Dynamic Programming Algorithm Applied to Economic Models," Econometrica, Econometric Society, Econometric Society, vol. 66(2), pages 409-426, March.
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Cited by:
  1. Fukushima, Kenichi & Waki, Yuichiro, 2013. "A polyhedral approximation approach to concave numerical dynamic programming," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 37(11), pages 2322-2335.

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