Commodity prices rise sharply at turning points

Bin Li, David Saad, K.Y. Michael Wong, Amos H.M. Chan, Tsz Yan So, Hrmanni Heimonen

Research output: Preprint or Working paperWorking paper

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.
Original languageEnglish
PublisherAmerican Physical Society
Publication statusSubmitted - 2017

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