IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1508.03677.html
   My bibliography  Save this paper

How Market Structure Drives Commodity Prices

Author

Listed:
  • Bin Li

    (Department of Physics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

  • K. Y. Michael Wong

    (Department of Physics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

  • Amos H. M. Chan

    (Department of Physics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

  • Tsz Yan So

    (Department of Physics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

  • Hermanni Heimonen

    (Department of Physics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

  • Junyi Wei

    (Department of Physics, The Hong Kong University of Science and Technology, Clear Water Bay, Hong Kong)

  • David Saad

    (The Nonlinearity and Complexity Research Group, Aston University, Birmingham B4 7ET, United Kingdom)

Abstract

We introduce an agent-based model, in which agents set their prices to maximize profit. At steady state the market self-organizes into three groups: excess producers, consumers and balanced agents, with prices determined by their own resource level and a couple of macroscopic parameters that emerge naturally from the analysis, akin to mean-field parameters in statistical mechanics. When resources are scarce prices rise sharply below a turning point that marks the disappearance of excess producers. To compare the model with real empirical data, we study the relations between commodity prices and stock-to-use ratios of a range of commodities such as agricultural products and metals. By introducing an elasticity parameter to mitigate noise and long-term changes in commodities data, we confirm the trend of rising prices, provide evidence for turning points, and indicate yield points for less essential commodities.

Suggested Citation

  • Bin Li & K. Y. Michael Wong & Amos H. M. Chan & Tsz Yan So & Hermanni Heimonen & Junyi Wei & David Saad, 2015. "How Market Structure Drives Commodity Prices," Papers 1508.03677, arXiv.org, revised Jan 2018.
    • Handle: RePEc:arx:papers:1508.03677
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1508.03677
    File Function: Latest version
    Download Restriction: no
    ---><---

    Citations

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


    Cited by:

    1. Hamulczuk, Mariusz & Makarchuk, Oksana & Sica, Edgardo, 2019. "Searching for market integration: Evidence from Ukrainian and European Union rapeseed markets," Land Use Policy, Elsevier, vol. 87(C).
    2. Brown, Patrick R. & O’Sullivan, Francis M., 2019. "Shaping photovoltaic array output to align with changing wholesale electricity price profiles," Applied Energy, Elsevier, vol. 256(C).
    3. Qushim, Berdikul & Gillespie, Jeffrey, 2016. "Women Farm Operators in the U.S. Meat Goat Production: Who is More Productive?," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230004, Southern Agricultural Economics Association.

    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:arx:papers:1508.03677. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.