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A Squeezer Round the Corner? Self-Regulation and Forward Markets

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  • Mollgaard, H Peter

Abstract

Squeezes are registered in the forward market for Brent crude oil. The squeezer accumulates forward contracts and creates artificial demand. This causes the price to surge and introduces uncertainty about the market outcome. Squeezes therefore render the market institution less palatable to other market participants. Producers may have a longterm interest in keeping market clearing smooth, e.g., by supplying stocks to squeezed traders. The extent to which such self-regulation should be carried out is analyzed in the context of a repeated game. Unless the probability of a squeeze is very small, self-regulation should be possible. Copyright 1997 by Royal Economic Society.

Suggested Citation

  • Mollgaard, H Peter, 1997. "A Squeezer Round the Corner? Self-Regulation and Forward Markets," Economic Journal, Royal Economic Society, vol. 107(440), pages 104-112, January.
  • Handle: RePEc:ecj:econjl:v:107:y:1997:i:440:p:104-12
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    Cited by:

    1. Aspers, Patrik, 2009. "How are markets made?," MPIfG Working Paper 09/2, Max Planck Institute for the Study of Societies.
    2. Lien, Donald & Tse, Yiu Kuen, 2006. "A survey on physical delivery versus cash settlement in futures contracts," International Review of Economics & Finance, Elsevier, vol. 15(1), pages 15-29.

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