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Price determination in monopolistic markets with inventory adjustment

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  • Rafati, M. Reza

Abstract

This paper presents a practical model for the analysis of the price determination mechanism in raw materials markets that are characterized by the dominance of a large firm. The model takes explicit note of the influence of inventory adjustments; it is postulated that the dominant firm's decision on price and production levels is negatively related to the difference between actual and desired inventory levels. In a first empirical test, the model is applied to an analysis of the nickel industry. The empirical results support the hypothesized role of inventories and show the importance of inventory adjustments relative to the other factors determining price and production behavior.

Suggested Citation

  • Rafati, M. Reza, 1981. "Price determination in monopolistic markets with inventory adjustment," Kiel Working Papers 125, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:125
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    File URL: https://www.econstor.eu/bitstream/10419/47159/1/017477689.pdf
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    Cited by:

    1. Rafati, Mohammed R., 1982. "An econometric model of the world nickel industry," Kiel Working Papers 160, Kiel Institute for the World Economy (IfW Kiel).

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