The Economics of Storing a Non-storable Commodity

Gerrit van Kooten, Andrew Schmitz and W. H. Furtan

Canadian Journal of Economics, 1988, vol. 21, issue 3, 579-86

Abstract: Commodity stabilization under a buffer stock and under a buffer fund are compared. In the c ase where a good cannot be physically stored, stability brought about by a buffer fund scheme cannot result in a net welfare improvement f or society. When instability is due only to demand variability, there are no gainers or losers; when instability is due to supply variabil ity, a buffer fund does not result in a welfare loss to society, but there is a transfer of income from taxpayers to producers. Hence, pro ducer arguments for a buffer fund are a desire for a redistribution o f income in their favor.

Date: 1988
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