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The Long-Run and Short-Run Impact of Captive Supplies on the Spot Market Price: An Agent-Based Artificial Market

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  • Tong Zhang
  • B. Wade Brorsen

Abstract

An agent-based model is developed that matches the results of Xia and Sexton (2004) as well as our generalization of their model. We relax Xia and Sexton's assumption of no supply response by captive feeders, which reduces the price-depressing effect of captive supplies. Finally, the agent-based model is used to simulate packers choosing both captive supply quantities and spot market quantities. Packers in the relaxed agent-based model choose no captive supplies and thus reach the Cournot solution. The research narrows the gap between theoretical models and the empirical work on captive supplies that shows little effect on prices, but a gap remains. Copyright 2010, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ajae/aaq033
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 92 (2010)
Issue (Month): 4 ()
Pages: 1181-1194

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Handle: RePEc:oup:ajagec:v:92:y:2010:i:4:p:1181-1194

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Cited by:
  1. Tong Zhang & B. Brorsen, 2011. "Oligopoly firms with quantity-price strategic decisions," Journal of Economic Interaction and Coordination, Springer, vol. 6(2), pages 157-170, November.
  2. Christopher Boyer & B. Brorsen, 2014. "Implications of a Reserve Price in an Agent-Based Common-Value Auction," Computational Economics, Society for Computational Economics, vol. 43(1), pages 33-51, January.

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