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Equilibrium Storage in a Markov Economy

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  • Creti, Anna
  • Villeneuve, Bertrand

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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Bibliographic 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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Keywords: Price stabilization; strategic stocks; supply risk;

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References

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  1. Deaton, A. & Laroque, G., 1989. "On The Behavior Of Commodity Prices," Papers 145, Princeton, Woodrow Wilson School - Public and International Affairs.
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  14. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Resource and Energy Economics, Elsevier, vol. 31(1), pages 24-38, January.
  15. Edwards, R T & Hallwood, C P, 1980. "The Determination of Optimum Buffer Stock Intervention Rules," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 151-66, February.
  16. William W. Hogan, 1983. "Oil Stockpiling: Help Thy Neighbor," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 49-72.
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Cited by:
  1. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Resource and Energy Economics, Elsevier, vol. 31(1), pages 24-38, January.
  2. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Gas Storage and Security of Supply in the Medium Run," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/4808, Université Paris-Dauphine.

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