A Model of Inter-Regional Trade in Grains with Storage
AbstractWhen there is spatial arbitrage between food markets, the price differential between the markets should equal the cost of transfer. This simple arbitrage rule has formed the basis of many empirical tests of the performance of developing countries’ food markets. Here, a more complex structure to regional food markets is hypothesised. By including commodity storage into a model of inter-regional trade, it is shown that, in an optimal dynamic program, trade is intermittent. The possibility of periods without trade casts doubt on the validity of using tests for correlation in market prices as indicators of market performance.
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Bibliographic InfoPaper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 10.
Date of creation: Sep 2004
Date of revision:
Food markets; optimal control; storage; spatial equilibrium.;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
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Cambridge University Press, number 9780521331586, December.
- Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465, December.
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- Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66, pages 233.
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