A Model of Inter-Regional Trade in Grains with Storage
When there is spatial arbitrage between food markets, the price differential between the markets should equal the cost of transfer. This simple arbitrage rule has formed the basis of many empirical tests of the performance of developing countries' food markets. Here, a more complex structure to regional food markets is hypothesised. By including commodity storage into a model of inter-regional trade, it is shown that, in an optimal dynamic program, trade is intermittent. The possibility of periods without trade casts doubt on the validity of using tests for correlation in market prices as indicators of market performance.
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- Brennan, Donna & Williams, Jeffrey & Wright, Brian D, 1997. "Convenience Yield without the Convenience: A Spatial-Temporal Interpretation of Storage under Backwardation," Economic Journal, Royal Economic Society, vol. 107(443), pages 1009-22, July.
- repec:cup:cbooks:9780521331586 is not listed on IDEAS
- Scheinkman, Jose A & Schechtman, Jack, 1983. "A Simple Competitive Model with Production and Storage," Review of Economic Studies, Wiley Blackwell, vol. 50(3), pages 427-41, July.
- Lester G. Telser, 1958. "Futures Trading and the Storage of Cotton and Wheat," Journal of Political Economy, University of Chicago Press, vol. 66, pages 233.
- repec:cup:cbooks:9780521337465 is not listed on IDEAS
- Bob Baulch, 1997. "Transfer Costs, Spatial Arbitrage, and Testing for Food Market Integration," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(2), pages 477-487.
- Seierstad, Atle & Sydsaeter, Knut, 1977. "Sufficient Conditions in Optimal Control Theory," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 367-91, June.
- repec:cup:cbooks:9780521311748 is not listed on IDEAS
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