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Price stabilization using buffer stocks

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  • Athanasiou, George
  • Karafyllis, Iasson
  • Kotsios, Stelios

Abstract

The price stabilization problem is stated and solved for a nonlinear cobweb model with government stocks. It is shown that if the storage capacity for the commodity is sufficiently large then there exists a simple stabilization policy, called the 'keep supply at equilibrium (KSE)' policy, such that the equilibrium price is a global attractor for the corresponding closed-loop system. In addition, it is shown that if the government approximates the equilibrium supply with the average supply, stabilization is guaranteed. We refer to this policy as 'keep supply at average (KSA)'.

Suggested Citation

  • Athanasiou, George & Karafyllis, Iasson & Kotsios, Stelios, 2008. "Price stabilization using buffer stocks," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1212-1235, April.
  • Handle: RePEc:eee:dyncon:v:32:y:2008:i:4:p:1212-1235
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    References listed on IDEAS

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    Cited by:

    1. Yu, Yi & Willis, David, 2016. "The Effect of China’s Pork Reserve Program on Pork Price Volatility," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 235829, Agricultural and Applied Economics Association.
    2. Ingrid Kubin & Laura Gardini, 2013. "Border collision bifurcations in boom and bust cycles," Journal of Evolutionary Economics, Springer, vol. 23(4), pages 811-829, September.
    3. Karafyllis, Iasson & Jiang, Zhong-Ping & Athanasiou, George, 2010. "Nash Equilibrium and Robust Stability in Dynamic Games: A Small-Gain Perspective," MPRA Paper 26890, University Library of Munich, Germany, revised 23 Sep 2010.
    4. Athanasiou, George & Kotsios, Stelios, 2008. "An algorithmic approach to exchange rate stabilization," Economic Modelling, Elsevier, vol. 25(6), pages 1246-1260, November.
    5. Hwang, Tsorng-Chyi & Chen, Meng-Gu & Chang, Chia-Lin, 2011. "Price stabilization in the Taiwan hog and broiler industries: Evidence from a STAR approach," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 82(2), pages 213-219.
    6. repec:spr:jecstr:v:6:y:2017:i:1:d:10.1186_s40008-017-0065-z is not listed on IDEAS
    7. Sophie Mitra & Jean‐Marc Boussard, 2012. "A simple model of endogenous agricultural commodity price fluctuations with storage," Agricultural Economics, International Association of Agricultural Economists, vol. 43(1), pages 1-15, January.
    8. Swaray, Raymond, 2011. "Commodity buffer stock redux: The role of International Cocoa Organization in prices and incomes," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 361-369, May.

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