A Dynamic Model of the Competitive Firm with a Forward Market

Abstract

This article brings together and extends several strands of literature concerning the behaviour of the competitive firm operating under (spot) price uncertainty. Specifically, the article analyses a dynamic model in which the firm can hold inventories and can sell in the forward market (at a certain price). It shows that both the existence of inventories and the existence of a forward market encourages the firm to increase its output. Comparative static propositions are derived, and the results related to previous findings in the earlier literature.

Citation

Hey, J.D. (1985), "A Dynamic Model of the Competitive Firm with a Forward Market", Journal of Economic Studies, Vol. 12 No. 3, pp. 21-35. https://doi.org/10.1108/eb002598