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Economics Letters

Market Power and Forward Prices

Journal Article
Ruddell, Keith, Anthony Downward and Andy Philpott (2018). “Market Power and Forward Prices”. Economics Letters 166, 6–9.

Keith Ruddell, Anthony Downward, Andy Philpott

Our model of strategic behavior in sequential markets exhibits a persistent forward price premium. This premium is not susceptible to arbitrage by speculators on the forward market, since purchasers prefer forward contracts backed by producers with market power.