Inventory Dynamics Under Transaction Costs

14 Pages Posted: 24 Mar 2020

See all articles by Jean‐Paul Chavas

Jean‐Paul Chavas

University of Maryland

Paula M. Despins

affiliation not provided to SSRN

T. Randy Fortenbery

University of Wisconsin - Madison - Department of Agricultural & Applied Economics

Date Written: May 2000

Abstract

A conceptual model of storage behavior is developed. Optimal intertemporal pricing is derived to analyze the effects of transaction costs on storage andarbitrage pricing. It is shown how transaction costs can rationalize the existence of an inverse carrying charge for inventory. The model is applied to U.S. soybeans stocks for the period 1960–95. The empirical results suggest that transaction costs have a significant influence on storage behavior andintertemporal arbitrage pricing.

Keywords: inventory, arbitrage pricing, convenience yield, soybean, G310, Q110

Suggested Citation

Chavas, Jean‐Paul and Despins, Paula M. and Fortenbery, T. Randy, Inventory Dynamics Under Transaction Costs (May 2000). American Journal of Agricultural Economics, Vol. 82, Issue 2, pp. 260-273, 2000, Available at SSRN: https://ssrn.com/abstract=3557441 or http://dx.doi.org/10.1111/0002-9092.00023

Jean‐Paul Chavas (Contact Author)

University of Maryland

Paula M. Despins

affiliation not provided to SSRN

No Address Available

T. Randy Fortenbery

University of Wisconsin - Madison - Department of Agricultural & Applied Economics ( email )

427 Lorch St.
Taylor Hall, Henry 411
Madison, WI 53706-1503
United States
608-262-4908 (Phone)

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