Scandinavian Working Papers in Economics

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2006/19: Strategic pricing of commodities

Kurt Jörnsten () and Jan Ubøe ()
Additional contact information
Kurt Jörnsten: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway
Jan Ubøe: Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration, Postal: NHH , Department of Finance and Management Science, Helleveien 30, N-5045 Bergen, Norway

Abstract: In this paper we will consider a setting where a large number of agents are trading commodity bundles. Assuming that agents of the same type have a certain utility attached to each transaction, we construct a statistical equilibrium which in turn implies prices on the different commodities. Our basic question is then the following: Assume that some commodities come out with prices that are socially unacceptable. Is it possible to change these prices systematically if a new type of agents is paid to enter the market? In the paper we will consider explicit examples where this can be done.

Keywords: Agent preferences; efficient markets; statistical equilibria; commodity prices; arbitrageurs

JEL-codes: D40; D50; G10

14 pages, December 1, 2006

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