On Storage Behavior Under Imperfect Competition,with Application to the American Cheese Market

This paper investigates the economic implications of storage behavior under imperfect competition. It evaluates the economic dynamics implied by a storage firm under alternative market structures. This includes perfect competition as well as imperfect competition under Cournot behavior. The conceptual analysis is used to specify and estimate a model of storage behavior, with an econometric application to the U.S. American cheese market. The empirical results provide statistical evidence of non-competitive storage behavior. They show how the exercise of market power can contribute to reduced stock fluctuations and increased price instability in the U.S. cheese market.