If the latter, I suggest you think in terms of dynamic behavior rather than supply and demand curves. What manipulators are doing is not trying to skim a profit for a brief period but rather to set up a long term control. this usually results in cooperation between or among a group, or outright collusion. I believe collusion is quite common, in fact the norm, among commodity producers. There are lots of colorful examples of price fixing.
Pen-l has discussed RATS IN THE GRAIN -- the book about ADM et. al.
An older book but a good read that I think describes how the world works is THE GREAT PRICE CONSPIRACY by John Herling, mid 1960s. convictions of GE, Westinghouse and a dozen others, where they used the phases of the moon to deterimine who got particular bids.
Gene Coyle
Michael Pollak wrote:
Is there a good book on article on gaming markets? The economics of monopoly are handled in Economics 101. But Opec had gotten me thinking about the economics of cornering, i.e., if a producer is not a monopoly supplier but simply a predominant one.
Say a consortium controls 30% of output, and there is a demand for 97% of capacity. If it reduces its output by 10%, removing the 3% slack, how much does the price go up by? What about 20%? At what point does it maximize its income? Conversely, what if there is 10% of slack in the market?
It seems there should be a turning point in market tightness (i.e, the percentage of slack, the extent to which available supply exceeds normal demand) below which cuts would lose money. And then, once we enter the zone where cuts increase income, there should be a second point where they get so great they start to decrease total income despite rising prices.
It seems it shouldn't be that hard to model with very basic demand curves; and that it shouldn't be that hard to find colorful examples from history; and one of them might well be oil.
So, has anybody done it?
And then, although it would too much to hope, there would be an obvious way to expand this model's usefulness by considering it over time: if price is raised X amount, how long does it take before demand goes down and supply goes up so that the cuts no longer make sense?
Any and all suggestions appreciated.
Michael
