A Commodity Price Process with a Unique Continuous Invariant Distribution Having Infinite Mean

• Published in: Econometrica Vol. 70; no. 3; pp. 1213 - 1219
• Main Authors: Bobenrieth H., Eugenio S. A., Bobenrieth H., Juan R. A., Wright, Brian D.
• Format: Journal Article
• Language: English
• Published: Oxford, UK and Boston, USA Blackwell Publishers Ltd 01.05.2002; Econometric Society; Blackwell; Blackwell Publishing Ltd
• Subjects: Agricultural production; Applications; Applied sciences; Atoms; Commodities; Commodity market; Commodity prices; Competition; Cost functions; Econometrics; Economic bubbles; Economic models; Economics; Exact sciences and technology; Futures; Infinity; Insurance, economics, finance; Market prices; Mathematics; Notes and Comments; Operational research and scientific management; Operational research. Management science; Portfolio theory; Price stabilization; Pricing; Probability and statistics; Probability theory and stochastic processes; Sciences and techniques of general use; Statistical analysis; Statistics; Stochastic analysis; Studies; Supply; Transition probabilities; Harvest index; Statistical method; Consumer behavior; Bellman equation; Infinite mean; Distribution price; Econometrics; Market price; Competition(economy); Invariant distribution
• ISSN: 0012-9682; 1468-0262
• DOI: 10.1111/1468-0262.00323

In standard competitive models of a storable commodity in the tradition of Gustafson (1958), expected price for the following period exceeds current price by the marginal cost of storage, whenever stocks are positive. The models fit the stylized fact that even after the worst production realization there is always a finite market-clearing price, via the adoption of one of two restrictions: demand is specified so that price at consumption equal to minimum harvest is finite, or the probability of minimum harvest is zero.