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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 20520.

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Date of creation: 11 Jan 2010
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Handle: RePEc:pra:mprapa:20520

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Keywords: Price stabilization; strategic stocks; supply risk;

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  2. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2008. "Storage and Security of Supply in the Medium Run," MPRA Paper 11986, University Library of Munich, Germany.
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Cited by:
  1. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2008. "Storage and Security of Supply in the Medium Run," MPRA Paper 11986, University Library of Munich, Germany.

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