A Dynamic Marketing, Storage and Transportation System with Perfect Competition in Each of Its Markets

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Abstract
Presented herein is a dynamic analysis of a marketing and transportation system having attributes that are common in developed economies. The key agents are the traders who integrate the system spatially and temporally by shipping goods to arbitrage prices and storing goods to speculate. In distinction from prior studies, this work allows each trader to be well informed about past prices in all the markets of the system, able to ship to many markets simultaneously, and able to store goods in various locations for many different storage periods simultaneously. It is assumed that each market within the system clears on every market day under perfect competition, but the overall system is allowed to remain in disequilibrium over time and among its spatially separated markets. This results in a system of non-linear difference equations from which all prices and quantity flows can be determined recursively. Under some reasonable assumptions it is shown that the system has a unique equilibrium state which is asymptotically stable.

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