Commodity prices rise sharply at turning points

Li, Bin, Saad, David, Wong, K.Y. Michael, Chan, Amos H.M., So, Tsz Yan and Heimonen, Hrmanni (2017). Commodity prices rise sharply at turning points. Working Paper. American Physical Society.

Abstract

Commodity prices depend on supply and demand. With an uneven distribution of resources, prices are high at locations starved of commodity and low where it is abundant. We introduce an agent-based model in which agents set their prices to maximize profit. At steady state, the market self-organizes into three groups: excess producers, consumers, and balanced agents. When resources are scarce, prices rise sharply at a turning point due to the disappearance of excess producers. Market data of commodities provide evidence of turning points for essential commodities, as well as a yield point for non-essential ones.

Divisions: Engineering & Applied Sciences > Systems analytics research institute (SARI)
Engineering & Applied Sciences > Mathematics
Published Date: 2017
Submitted Date: 2017
Authors: Li, Bin
Saad, David ( 0000-0001-9821-2623)
Wong, K.Y. Michael
Chan, Amos H.M.
So, Tsz Yan
Heimonen, Hrmanni

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