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Commodity storage with durable shocks : A simple Markovian model

Author

Listed:
  • Anna Creti

    (IUT de Ville-d'Avray - UPN - Université Paris Nanterre)

  • Bertrand Villeneuve

    (LEDa - Laboratoire d'Economie de Dauphine - Université Paris-Dauphine)

Abstract

We model an economy that alternates randomly between abundance and scarcity episodes. We develop an original method to characterize in detail the structure of the Markovian competitive equilibrium. Accumulation and drainage of stocks are the main focuses. Economically appealing comparative statics results are proved. We also characterize stationary distribution of states. We extend the model to discuss price stabilization policies, injection and release costs, and limited storage capacity. Overall, the analysis delineates the notion of "flexible economy".

Suggested Citation

  • Anna Creti & Bertrand Villeneuve, 2013. "Commodity storage with durable shocks : A simple Markovian model," Post-Print hal-01517436, HAL.
  • Handle: RePEc:hal:journl:hal-01517436
    DOI: 10.1007/s11579-013-0108-7
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01517436
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    File URL: https://hal.archives-ouvertes.fr/hal-01517436/document
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    References listed on IDEAS

    as
    1. Chambers, Marcus J & Bailey, Roy E, 1996. "A Theory of Commodity Price Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 924-957, October.
    2. Turnovsky, Stephen J, 1976. "The Distribution of Welfare Gains from Price Stabilization: The Case of Multiplicative Disturbances," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 17(1), pages 133-148, February.
    3. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Resource and Energy Economics, Elsevier, vol. 31(1), pages 24-38, January.
    4. Stephen J. Turnovsky, 1974. "Price Expectations and the Welfare Gains from Price Stabilization," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 56(4), pages 706-716.
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    Cited by:

    1. Salant, Stephen W. & Yu, Xueying, 2013. "The Effect of Stochastic Oscillations in Property Rights Regimes on Forest Output in China," Discussion Papers dp-13-08, Resources For the Future.

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