Speculation on Primary Commodities: The Effects of Restricted Entry.
We present a model of oligopolistic commodity speculation, in which a limited number of speculators practice non-cooperative storage in an infinite-horizon game. A significant technical difficulty due to the non-negative stock constraint is overcome, and a tractable sub-game perfect equilibrium is presented, in which it is shown that less is stored and prices are more volatile than under perfect competition. It turns out that a tax on consumption of the good would increase storage, stabilize prices, increase welfare and raise speculative profits; the oligopolists would thus lobby for a tariff raised against their own shipments. Copyright 1999 by The Review of Economic Studies Limited.
Year of publication: |
1999
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Authors: | McLaren, John |
Published in: |
Review of Economic Studies. - Wiley Blackwell, ISSN 0034-6527. - Vol. 66.1999, 4, p. 853-71
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Publisher: |
Wiley Blackwell |
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