Premium
Market Power and Buffer Stocks
Author(s) -
SIMMONS PHIL,
STAHL DALE
Publication year - 1992
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/j.1475-4932.1992.tb01744.x
Subject(s) - economics , market power , microeconomics , price elasticity of demand , buffer stock scheme , stock (firearms) , pareto principle , pareto optimal , monetary economics , monopoly , multi objective optimization , operations management , mathematical optimization , mechanical engineering , mathematics , engineering
The first‐order conditions for a monopolist inventory holder are found under more general conditions than previously. It is found that monopolist storers facing inelastic demand will carry over more stock than they would with competition unless the elasticity of demand b increasing as price decreases or is constant. The competitive stocks equilibrium is identified and found to be Pareto optimal and hence Sams' result that there will be no losers from a rent‐maximizing buffer stock policy is shown to be wrong.