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Equilibrium Storage in a Markov Economy

  • Creti, Anna
  • Villeneuve, Bertrand

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."

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20520.

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Date of creation: 11 Jan 2010
Date of revision:
Handle: RePEc:pra:mprapa:20520
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  1. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
  2. Chaton, Corinne & Creti, Anna & Villeneuve, Bertrand, 2009. "Storage and security of supply in the medium run," Economics Papers from University Paris Dauphine 123456789/5204, Paris Dauphine University.
  3. Bryan R. Routledge & Duane J. Seppi & Chester S. Spatt, 2000. "Equilibrium Forward Curves for Commodities," Journal of Finance, American Finance Association, vol. 55(3), pages 1297-1338, 06.
  4. Baldursson, Fridrik M & von der Fehr, N.-H.M.Nils-Henrik M, 2004. "Price volatility and risk exposure: on market-based environmental policy instruments," Journal of Environmental Economics and Management, Elsevier, vol. 48(1), pages 682-704, July.
  5. Dale A. Carlson & Anne M. Sholtz, 1994. "Designing Pollution Market Instruments: Cases Of Uncertainty," Contemporary Economic Policy, Western Economic Association International, vol. 12(4), pages 114-125, October.
  6. Angus Deaton & Guy Laroque, 1990. "On The Behavior of Commodity Prices," NBER Working Papers 3439, National Bureau of Economic Research, Inc.
  7. Hennessy, David A. & Roosen, Jutta, 1999. "Stochastic Pollution, Permits, and Merger Incentives," Journal of Environmental Economics and Management, Elsevier, vol. 37(3), pages 211-232, May.
  8. Montero, Juan-Pablo, 1998. "Marketable pollution permits with uncertainty and transaction costs," Resource and Energy Economics, Elsevier, vol. 20(1), pages 27-50, March.
  9. 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 133-48, February.
  10. Roy Bailey and Marcus Chambers, . "A Theory of Commodity Price Fluctuations," Economics Discussion Papers 432, University of Essex, Department of Economics.
  11. Edwards, R T & Hallwood, C P, 1980. "The Determination of Optimum Buffer Stock Intervention Rules," The Quarterly Journal of Economics, MIT Press, vol. 94(1), pages 151-66, February.
  12. Hallett, A. J. Hughes, 1984. "Optimal stockpiling in a high-risk commodity market the case of copper," Journal of Economic Dynamics and Control, Elsevier, vol. 8(2), pages 211-238, November.
  13. Olivier ROUSSE & BenoƮt SEVI, 2006. "Banking behavior under uncertainty: Evidence from the US Sulfur Dioxide Emissions Allowance Trading Program," Cahiers du CREDEN (CREDEN Working Papers) 06.02.63, CREDEN (Centre de Recherche en Economie et Droit de l'Energie), Faculty of Economics, University of Montpellier 1.
  14. Hillman, Arye L & Long, Ngo Van, 1983. "Pricing and Depletion of an Exhaustible Resource When There Is Anticipation of Trade Disruption," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 215-33, May.
  15. Sweeney, James L, 1977. "Economics of Depletable Resources: Market Forces and Intertemporal Bias," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 125-41, February.
  16. William W. Hogan, 1983. "Oil Stockpiling: Help Thy Neighbor," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 49-72.
  17. Devarajan, Shantayanan & Weiner, Robert J., 1989. "Dynamic policy coordination: Stockpiling for energy security," Journal of Environmental Economics and Management, Elsevier, vol. 16(1), pages 9-22, January.
  18. Albert L. Nichols & Richard J. Zeckhauser, 1977. "Stockpiling Strategies and Cartel Prices," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 66-96, Spring.
  19. repec:cup:cbooks:9780521326162 is not listed on IDEAS
  20. repec:cup:cbooks:9780521023399 is not listed on IDEAS
  21. Shaul Ben-David & David Brookshire & Stuart Burness & Michael McKee & Christian Schmidt, 2000. "Attitudes toward Risk and Compliance in Emission Permit Markets," Land Economics, University of Wisconsin Press, vol. 76(4), pages 590-600.
  22. Creti, Anna & Villeneuve, Bertrand, 2009. "Gas storage and security of Supply," Economics Papers from University Paris Dauphine 123456789/5383, Paris Dauphine University.
  23. Schennach, Susanne M., 2000. "The Economics of Pollution Permit Banking in the Context of Title IV of the 1990 Clean Air Act Amendments," Journal of Environmental Economics and Management, Elsevier, vol. 40(3), pages 189-210, November.
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