Price relations on futures markets for storable commodities (Q1064953)

The paper presents a simple theoretical model of the spot and futures markets for a storable commodity. The problem of existence of a spot market equilibrium is reduced as usual in competitive systems to an optimization problem supported by a system of prices. The underlying assumption is that the demand on certain related markets of the representative firm is subject to continual random fluctuations which prevent the market from reaching a (partial) equilibrium state. This fact induces certain kind of costs which are measured by means of a stock-out cost function.