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The Determination of Optimum Buffer Stock Intervention Rules

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  • R. Edwards
  • C. P. Hallwood

Abstract

It has been established for some time in the case of linear supply and demand curves that are subject to parallel stochastic shift factors that the joint welfare of trading partners measured as the sum of consumers' and producers' surpluses is increased by a reduction of price instability. This paper seeks to combine this result with information on the costs of buffer stock schemes to establish the optimum degree of price stabilization. The maximization of the partners' joint expected net benefit yields an optimum intervention price range that will vary with demand and supply elasticities, and other market conditions.

Suggested Citation

  • R. Edwards & C. P. Hallwood, 1980. "The Determination of Optimum Buffer Stock Intervention Rules," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(1), pages 151-166.
    • Handle: RePEc:oup:qjecon:v:94:y:1980:i:1:p:151-166.
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    File URL: http://hdl.handle.net/10.2307/1884609
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    Cited by:

    1. Creti, Anna & Villeneuve, Bertrand, 2008. "Equilibrium Storage in a Markov Economy," MPRA Paper 11944, University Library of Munich, Germany.
    2. Shigeru Akiyama & Masahiro Kawai, 1985. "Welfare implications of commodity price stabilization with partially flexible production, private storage and buffer-stock costs," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 121(2), pages 261-279, June.

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