Commodity storage with durable shocks: A simple Markovian model

Anna Creti and Bertrand Villeneuve
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Anna Creti: IUT de Ville-d'Avray - UPN - Université Paris Nanterre

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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".

Keywords: supply risk; strategic stocks; Price stabilization (search for similar items in EconPapers)
Date: 2013
Note: View the original document on HAL open archive server: https://hal.science/hal-01517436v1
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Published in Mathematics and Financial Economics, 2013, 7 (4), pp.32. ⟨10.1007/s11579-013-0108-7⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01517436

DOI: 10.1007/s11579-013-0108-7

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