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
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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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