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Speculative storage in imperfectly competitive markets

Author

Listed:
  • Sébastien Mitraille

    (TBS - Toulouse Business School)

  • Henry Thille

    (University of Guelph [Guelf, Ontario, Canada])

Abstract

Markets for many commodities are characterized by imperfectly competitive production as well as substantial storage by speculators who are attracted by significant price volatility. We examine how speculative storage affects the behavior of an oligopoly producing a commodity for which demand is subject to random shocks. Speculators compete with consumers when purchasing the commodity and then subsequently compete with producers when selling their stocks, resulting in two opposing incentives: on the one hand, producers would like to increase production to capture future sales in advance by selling to speculators; while on the other hand, they would like to withhold production to deter speculation, thereby eliminating the additional supply from speculators in future periods. We find that the incentive to sell to speculators can be quite strong, potentially resulting in prices sufficiently high to drive consumers from the market. Furthermore, these incentives are non-monotonic in the number of producers: speculative storage occurs more frequently in a relatively concentrated oligopoly than in the extremes of monopoly or perfect competition.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Sébastien Mitraille & Henry Thille, 2014. "Speculative storage in imperfectly competitive markets," Post-Print hal-05227159, HAL.
    • Handle: RePEc:hal:journl:hal-05227159
    DOI: 10.1016/j.ijindorg.2014.07.001
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    Cited by:

    1. Xiang, Jie & He, Xiaozhou & Cheng, T.C.E., 2025. "Retailer hoarding in emergency situations: A game-theoretic analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 200(C).
    2. Lenhard, Severin, 2022. "Imperfect competition with costly disposal," International Journal of Industrial Organization, Elsevier, vol. 82(C).
    3. David Andrés‐Cerezo & Natalia Fabra, 2023. "Storing power: market structure matters," RAND Journal of Economics, RAND Corporation, vol. 54(1), pages 3-53, March.
    4. Lenhard, Severin, 2022. "Imperfect Competition with Costly Disposal," VfS Annual Conference 2022 (Basel): Big Data in Economics 264038, Verein für Socialpolitik / German Economic Association.
    5. Sebastien Mitraille & Henry Thille, 2015. "Speculative Constraints on Oligopoly," Working Papers 1505, University of Guelph, Department of Economics and Finance.
    6. Sébastien Mitraille & Henry Thille, 2020. "Strategic advance sales, demand uncertainty and overcommitment," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 69(3), pages 789-828, April.
    7. Severin Lenhard, 2021. "Imperfect Competition with Costly Disposal," Diskussionsschriften dp2105, Universitaet Bern, Departement Volkswirtschaft.
    8. Fabio Antoniou & Raffaele Fiocco, 2023. "Storable Good Market With Intertemporal Cost Variations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(1), pages 361-385, February.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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