Speculative Inventory Holding and Price Stability

Abstract

[Introduction] As is true for many economic phenomena, the nature and effects of speculative carryover can be investigated from two polar viewpoints: perfect competition and monopoly. The competitive speculator does not expect his actions to affect current or future prices. He forms expectations about future prices on the basis of current and past prices and on possibly other information and then acts accordingly. The monopolistic speculator understands that his actions affect current and future prices--not only because his excess demand is part of aggregate excess demand but also because his actions may result in altered expectations on the part of other participants in the market.

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