
Commodity storage with durable shocks : A simple Markovian model
Villeneuve, Bertrand; Creti, Anna (2014), Commodity storage with durable shocks : A simple Markovian model, Mathematics and Financial Economics, 8, 2, p. 169--192. http://dx.doi.org/10.1007/s11579-013-0108-7
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Article accepté pour publication ou publiéDate
2014Journal name
Mathematics and Financial EconomicsVolume
8Number
2Publisher
Springer
Pages
169--192
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Villeneuve, Bertrand
Laboratoire d'Economie de Dauphine [LEDa]
Creti, Anna
Laboratoire d'Economie de Dauphine [LEDa]
Abstract (EN)
We model an economy that alternates randomly between abundance and scarcityepisodes. 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 discussprice stabilization policies, injection and release costs, and limited storage capacity.Overall, the analysis delineates the notion of "flexible economy".Subjects / Keywords
Price stabilization; supply risk; strategic stocksRelated items
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