IDEAS home Printed from https://ideas.repec.org/a/bla/econom/v73y2006i290p229-256.html
   My bibliography  Save this article

Commodity Spot Prices: An Exploratory Assessment of Market Structure and Forward‐Trading Effects

Author

Listed:
  • MARGARET E. SLADE
  • HENRY THILLE

Abstract

We assess how characteristics of product and forward markets affect levels and volatilities of commodity spot prices. We examine (i) how product market structure and forward market trading affect spot market games, (ii) the links between product market structure and spot price stability, (iii) whether forward trading destabilizes spot prices, and (iv) how information arrival affects price volatility and the volume of trade. We find that market structure models of the price level but not of price stability receive support, that increased forward trading leads to lower prices, and that the relationship between trading and price instability is indirect via a common causal factor.

Suggested Citation

  • Margaret E. Slade & Henry Thille, 2006. "Commodity Spot Prices: An Exploratory Assessment of Market Structure and Forward‐Trading Effects," Economica, London School of Economics and Political Science, vol. 73(290), pages 229-256, May.
  • Handle: RePEc:bla:econom:v:73:y:2006:i:290:p:229-256
    DOI: 10.1111/j.1468-0335.2006.00480.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-0335.2006.00480.x
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan J. J. Groen & Paolo A. Pesenti, 2011. "Commodity Prices, Commodity Currencies, and Global Economic Developments," NBER Chapters, in: Commodity Prices and Markets, pages 15-42, National Bureau of Economic Research, Inc.
    2. Alexander Steinmetz, 2010. "Price and Inventory Dynamics in an Oligopoly Industry: A Framework for Commodity Markets," Working Papers 092, Bavarian Graduate Program in Economics (BGPE).
    3. David P. Brown & Andrew Eckert, 2018. "Analyzing the Impact of Electricity Market Structure Changes and Mergers: The Importance of Forward Commitments," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(1), pages 101-137, February.
    4. Stuermer, Martin, 2018. "150 Years Of Boom And Bust: What Drives Mineral Commodity Prices?," Macroeconomic Dynamics, Cambridge University Press, vol. 22(3), pages 702-717, April.
    5. Karali, Berna & Ramirez, Octavio A., 2014. "Macro determinants of volatility and volatility spillover in energy markets," Energy Economics, Elsevier, vol. 46(C), pages 413-421.
    6. Steinmetz, Alexander, 2010. "Price and inventory dynamics in an oligopoly industry: A framework for commodity markets," W.E.P. - Würzburg Economic Papers 82, University of Würzburg, Chair for Monetary Policy and International Economics.
    7. Oladunjoye, Olusegun, 2008. "Market structure and price adjustment in the U.S. wholesale gasoline markets," Energy Economics, Elsevier, vol. 30(3), pages 937-961, May.
    8. Abhijit Sharma & Kelvin G Balcombe & Iain M Fraser, 2009. "Non-renewable resource prices: Structural breaks and long term trends," Economics Bulletin, AccessEcon, vol. 29(2), pages 805-819.
    9. Cinquegrana, Piero, 2008. "The Need for Transparency in Commodity and Commodity Derivatives Markets," ECMI Papers 1589, Centre for European Policy Studies.
    10. Ye, Wuyi & Guo, Ranran & Deschamps, Bruno & Jiang, Ying & Liu, Xiaoquan, 2021. "Macroeconomic forecasts and commodity futures volatility," Economic Modelling, Elsevier, vol. 94(C), pages 981-994.
    11. Mitsuru Igami, 2015. "Market Power in International Commodity Trade: The Case of Coffee," Journal of Industrial Economics, Wiley Blackwell, vol. 63(2), pages 225-248, June.
    12. Manel Antelo & Lluís Bru, 2018. "Option Contracts in a Vertical Industry," Manchester School, University of Manchester, vol. 86(4), pages 533-557, July.
    13. repec:ddj:fserec:y:2012:p:31-34 is not listed on IDEAS
    14. Joris Pinkse & Margaret Slade & Lihong Shen, 2006. "Dynamic Spatial Discrete Choice Using One-step GMM: An Application to Mine Operating Decisions," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 53-99.
    15. Pankaj Kumar GUPTA & Sunita RAVI, 2012. "Commodity Market Inefficiencies and Inflationary Pressures - India’s Economic Policy Dilemma," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 31-38.
    16. Álvarez-Uribe, Karla C. & Arango-Aramburo, Santiago & Larsen, Erik R., 2018. "Forward contracts in electricity markets and capacity investment: A simulation study," Utilities Policy, Elsevier, vol. 54(C), pages 1-10.
    17. Green, Richard & Le Coq, Chloé, 2010. "The length of contracts and collusion," International Journal of Industrial Organization, Elsevier, vol. 28(1), pages 21-29, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Osiris J. Parcero, 2009. "Optimal country's policy towards multinationals when local regions can choose between firm-specific and non-firm-specific policies," Working Papers 2009/34, Institut d'Economia de Barcelona (IEB).
    2. Dirk Schindler & Guttorm Schjelderup, 2006. "Company Tax Reform in Europe and its Effect on Collusive Behavior," CESifo Working Paper Series 1702, CESifo.
    3. Di Comite, Francesco & Thisse, Jacques-François & Vandenbussche, Hylke, 2014. "Verti-zontal differentiation in export markets," Journal of International Economics, Elsevier, vol. 93(1), pages 50-66.
    4. E. Villemeur & Helmuth Cremer & Bernard Roy & Joëlle Toledano, 2007. "Worksharing, access and bypass: the structure of prices in the postal sector," Journal of Regulatory Economics, Springer, vol. 32(1), pages 67-85, August.
    5. Jianqiang Zhang & Weijun Zhong & Shue Mei, 2012. "Competitive effects of informative advertising in distribution channels," Marketing Letters, Springer, vol. 23(3), pages 561-584, September.
    6. Lawrence J. White & W. Scott Frame, 2004. "Emerging Competition and Risk-Taking Incentives at Fannie Mae and Freddie Mac," Working Papers 04-02, New York University, Leonard N. Stern School of Business, Department of Economics.
    7. Donna, Javier D. & Pereira, Pedro & Trindade, Andre & Yoshida, Renan C., 2020. "Direct-to-Consumer Sales by Manufacturers and Bargaining," MPRA Paper 105773, University Library of Munich, Germany.
    8. Francisco B. Galarza & Gabriella Wong, 2017. "The Impact of Price Information on Consumer Behavior: An Experiment," Working Papers 2017-106, Peruvian Economic Association.
    9. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    10. Kessing, Sebastian G. & Konrad, Kai A. & Kotsogiannis, Christos, 2006. "Federal tax autonomy and the limits of cooperation," Journal of Urban Economics, Elsevier, vol. 59(2), pages 317-329, March.
    11. Etienne Billette de Villemeur & Kevin Guittet, 2004. "Optimal structure of air transport services when environnemental costs are taken into account," Post-Print hal-01022242, HAL.
    12. Franklin Mixon & Len Trevino & Taisa Minto, 2005. "Are legislative TV and campaign finance regulations complementary entry barriers? Evidence from the USA," Applied Economics, Taylor & Francis Journals, vol. 37(4), pages 387-396.
    13. Aurora García‐Gallego & Nikolaos Georgantzís, 2009. "Market Effects of Changes in Consumers' Social Responsibility," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(1), pages 235-262, March.
    14. Jena, Anupam B. & Philipson, Tomas J., 2008. "Cost-effectiveness analysis and innovation," Journal of Health Economics, Elsevier, vol. 27(5), pages 1224-1236, September.
    15. Leonard J. Mirman & Egas M. Salgueiro & Marc Santugini, 2013. "Integrating Real and Financial Decisions of the Firm," Cahiers de recherche 1333, CIRPEE.
    16. Thijs Vandemoortele & Koen Deconinck, 2014. "When Are Private Standards More Stringent than Public Standards?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(1), pages 154-171.
    17. McCarthy, Ian M., 2016. "Advertising intensity and welfare in an equilibrium search model," Economics Letters, Elsevier, vol. 141(C), pages 20-26.
    18. Kathryn E. Spier, 2003. "“Tied to the Mast”: Most-Favored-Nation Clauses in Settlement Contracts," The Journal of Legal Studies, University of Chicago Press, vol. 32(1), pages 91-120, January.
    19. Raventós, Pedro & Zolezzi, Sandro, 2015. "Electronic tendering of pharmaceuticals and medical devices in Chile," Journal of Business Research, Elsevier, vol. 68(12), pages 2569-2578.
    20. Raymond De Bondt & Jan Vandekerckhove, 2012. "Reflections on the Relation Between Competition and Innovation," Journal of Industry, Competition and Trade, Springer, vol. 12(1), pages 7-19, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:econom:v:73:y:2006:i:290:p:229-256. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley Content Delivery). General contact details of provider: https://edirc.repec.org/data/lsepsuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.