Relaxing competition through speculation: Committing to a negative supply slop
نویسندگان
چکیده
5 We demonstrate how commodity producers can take strategic specula6 tive positions in derivatives markets to soften competition in the spot mar7 ket. In our game, suppliers first choose a portfolio of call options and then 8 compete in supply functions. In equilibrium firms sell forward contracts 9 and buy call options to commit to downward sloping supply functions. Al10 though this strategy is risky, it reduces the elasticity of the residual demand 11 of competitors, who increase their mark-ups in response. We show that this 12 type of strategic speculation increases the level and volatility of commodity 13 prices and decreases welfare. 14
منابع مشابه
Relaxing competition through speculation: Committing to a negative supply slope
The trade in commodity derivatives is widespread and trading volumes often surpass that of the underlying commodities. Commodity derivatives markets have seen a 60fold increase in the value of trade between 1998 and 2008. In 2008 the outstanding value of commodity derivatives equaled $13 trillion. This is twice the worldwide output of commodities, and about 21% of world GDP. Ideally derivatives...
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