Equilibrium Storage in a Markov Economy
Villeneuve, Bertrand; Creti, Anna (2007-09), Equilibrium Storage in a Markov Economy. https://basepub.dauphine.fr/handle/123456789/2280
TypeDocument de travail / Working paper
Series titleCahiers de la Chaire Finance et Développement Durable
MetadataShow full item record
Abstract (EN)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.”
Subjects / KeywordsPrice Stabilization; Supply Risk; Strategic Stocks
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