Equilibrium Storage in a Markov Economy

Anna Creti and Bertrand Villeneuve

MPRA Paper from University Library of Munich, Germany

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: Price stabilization; strategic stocks; supply risk (search for similar items in EconPapers)
JEL-codes: C62 L90 Q48 (search for similar items in EconPapers)
Date: 2010-01-11
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Equilibrium Storage in a Markov Economy (2008)
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