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 InfoPaper provided by Columbia University, Department of Economics in its series Discussion Papers with number 1992_37.
Length: 35 pages
Date of creation: 1992
Date of revision:
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speculation ; commodities;
Other versions of this item:
- McLaren, John, 1999. "Speculation on Primary Commodities: The Effects of Restricted Entry," Review of Economic Studies, Wiley Blackwell, vol. 66(4), pages 853-71, October.
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- 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.
- Mitraille, Sébastien & Thille, Henry, 2009.
"Monopoly behaviour with speculative storage,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 33(7), pages 1451-1468, July.
- Bask, Mikael & Widerberg, Anna, 2008.
"Market Structure and the Stability and Volatility of Electricity Prices,"
Working Papers in Economics
327, University of Gothenburg, Department of Economics.
- 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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