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Comparing numerical methods for solving the competitive storage model

Listed author(s):
  • Christophe Gouel

    ()

    (ECO-PUB - Economie Publique - Institut national de la recherche agronomique (INRA) - AgroParisTech, Centre d'Etudes Prospectives et d'Informations Internationales)

This paper compares numerical methods for solving the competitive storage model. Because storage implies a nonnegativity constraint on stocks, the solution methods must be considered carefully. The model is solved using value function iteration and several projection approaches, including parameterised expectations and decision rules approximation. In considering a storage model with convenience yield, in which the inequality constraint is smoothed, perturbation methods are also applied. Parameterised expectations approximation proves to be the most accurate method, whereas perturbation techniques are shown inadequate for solving this highly nonlinear model. The endogenous grid method allows rapid solution if supply is assumed to be inelastic.

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Paper provided by HAL in its series Post-Print with number hal-01136976.

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Date of creation: 2013
Publication status: Published in Computational Economics, Springer Verlag, 2013, 41 (2), pp.267-295. <10.1007/s10614-012-9318-y>
Handle: RePEc:hal:journl:hal-01136976
DOI: 10.1007/s10614-012-9318-y
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01136976
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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