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Equilibrium Storage in a Markov Economy

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Author Info
Creti, Anna
Villeneuve, Bertrand

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Abstract

We model an economy that alternates randomly between abundance and scarcity episodes. We develop an original method to characterize in detail the structure of the Markovian competitive equilibrium. Accumulation and drainage of stocks are the main focuses. Economically appealing comparative statics results are proved. We also characterize stationary distribution of states. We extend the model to discuss price stabilization policies, injection and release costs, and limited storage capacity. Overall, the analysis delineates the notion of “flexible economy.”

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File URL: http://mpra.ub.uni-muenchen.de/11944/
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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11944.

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Date of creation: 10 Apr 2008
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Handle: RePEc:pra:mprapa:11944

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Related research
Keywords: Price stabilization; strategic stocks; supply risk;

Find related papers by JEL classification:
Q48 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Government Policy
L90 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - General
C61 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Optimization Techniques; Programming Models; Dynamic Analysis

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    Other versions:
  6. Albert L. Nichols & Richard J. Zeckhauser, 1977. "Stockpiling Strategies and Cartel Prices," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 66-96, Spring. [Downloadable!] (restricted)
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  9. Deaton, Angus & Laroque, Guy, 1992. "On the Behaviour of Commodity Prices," Review of Economic Studies, Blackwell Publishing, vol. 59(1), pages 1-23, January. [Downloadable!] (restricted)
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  10. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July. [Downloadable!] (restricted)
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  14. repec:mop:credwp:06.02.63 is not listed on IDEAS
  15. William W. Hogan, 1983. "Oil Stockpiling: Help Thy Neighbor," The Energy Journal, International Association for Energy Economics, vol. 4(3), pages 49-72.
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