Abstract
This paper investigates the economic implications of storage behavior under imperfect competition. It evaluates the economic dynamics implied by a storage firm under alternative market structures. This includes perfect competition as well as imperfect competition under Cournot behavior. The conceptual analysis is used to specify and estimate a model of storage behavior, with an econometric application to the US American cheese market. The empirical results provide statistical evidence of non-competitive storage behavior. They show that the exercise of market power contributes to reduced stock fluctuations and increased price instability in the US cheese market.
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