Monopoly behaviour with speculative storage
We analyze the effects of competitive storage when the production of the good is controlled by a monopolist. The existence of competitive storers serves to reduce the monopolist's effective demand when speculators are selling and to increase it when they are buying. This results in the monopolist manipulating the frequency of stockouts, and hence the price-smoothing effects of competitive storage. We find that competitive storage affects both the level and the volatility of price under monopoly. The average price level is higher with storage due to the monopolist's desire to induce stockouts by occasionally keeping the price just at the level that induces a stockout. Although storage does reduce the volatility of prices under monopoly production, prices are more volatile than they would be under perfectly competitive production, even though stockouts occur less frequently under monopoly. These results are demonstrated through closed-form solutions of the two-period version of the model and computational solutions to the infinite horizon version of the model.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Deaton, A. & Laroque, G., 1989.
"On The Behavior Of Commodity Prices,"
145, Princeton, Woodrow Wilson School - Public and International Affairs.
- Williams,Jeffrey C. & Wright,Brian D., 2005.
"Storage and Commodity Markets,"
Cambridge University Press, number 9780521023399, December.
- Newbery, David M, 1989. "The Theory of Food Price Stabilisation," Economic Journal, Royal Economic Society, vol. 99(398), pages 1065-82, December.
- Newbery, David M, 1984. "Commodity Price Stabilization in Imperfect or Cartelized Markets," Econometrica, Econometric Society, vol. 52(3), pages 563-78, May.
- José A. Scheinkman & Jack Schechtman, 1983. "A Simple Competitive Model with Production and Storage," Review of Economic Studies, Oxford University Press, vol. 50(3), pages 427-441.
- Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, March.
- Anderson, Ronald W & Gilbert, Christopher L, 1988. "Commodity Agreements and Commodity Markets: Lessons from Tin," Economic Journal, Royal Economic Society, vol. 98(389), pages 1-15, March.
- Thille, Henry, 2006. "Inventories, market structure, and price volatility," Journal of Economic Dynamics and Control, Elsevier, vol. 30(7), pages 1081-1104, July.
- Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
- John McLaren, 1999. "Speculation on Primary Commodities: The Effects of Restricted Entry," Review of Economic Studies, Oxford University Press, vol. 66(4), pages 853-871.
- Miranda, Mario J, 1998. "Numerical Strategies for Solving the Nonlinear Rational Expectations Commodity Market Model," Computational Economics, Springer;Society for Computational Economics, vol. 11(1-2), pages 71-87, April.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:33:y:2009:i:7:p:1451-1468. 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: (Shamier, Wendy)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.