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Optimal Commodity Storage: Privately and Publicly Financed Storage Compared

Author

Listed:
  • Paul Hallwood

    (Department of Economics, University of Connecticut, Mansfield, USA)

Abstract

Consideration of optimal commodity storage with different discount rates. Finding that, even with a lower discount rate than private storage, optimal government-financed storage may not narrow price fluctuations compared with optimal privately financed storage because a government has to choose a probability of buffer stock failure greater than zero to economize on storage costs that could conceivably become very large. There is no presumption that government financed storage would be larger, with narrower intervention bands and more stable prices, than with privately-financed storage. The welfare enhancing effect of government financed storage compared to private storage is therefore indeterminate.

Suggested Citation

  • Paul Hallwood, 2023. "Optimal Commodity Storage: Privately and Publicly Financed Storage Compared," Journal of Economic Analysis, Anser Press, vol. 2(1), pages 53-62, March.
    • Handle: RePEc:bba:j00001:v:2:y:2023:i:1:p:53-62:d:29
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