The Long-Run and Short-Run Impact of Captive Supplies on the Spot Market Price: An Agent-Based Artificial Market
Authored by Tong Zhang, B. Wade Brorsen
Date Published: 2010-07
DOI: 10.1093/ajae/aaq033
Sponsors:
Oklahoma Agricultural Experiment Station Hatch Project
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Abstract
An agent-based model is developed that matches the results of Xia and Sexton (2004) as well as our generalization of their model. We relax Xia and Sexton's assumption of no supply response by captive feeders, which reduces the price-depressing effect of captive supplies. Finally, the agent-based model is used to simulate packers choosing both captive supply quantities and spot market quantities. Packers in the relaxed agent-based model choose no captive supplies and thus reach the Cournot solution. The research narrows the gap between theoretical models and the empirical work on captive supplies that shows little effect on prices, but a gap remains.
Tags
C63
L13
Particle swarm optimization
Q13
agent-based market
captive supplies
cattle
industrial organization