Hedging export price risk in markets with imperfect competition.

摘要

This thesis analyzes the impact of market concentration on exporting nations seeking to hedge their exposure to external price fluctuations. It follows Dixit in modeling risk market failures as a first step in designing optimal risk market responses, rather than using such failures as justification for interventionist policies. Foremost among these failures is supply side concentration in world commodity markets. Accordingly, futures and insurance models in the thesis incorporate incentive incompatibility arising from the distortion of hedging incentives in an imperfect cash market.;Analytic models of futures markets with cash market concentration are also developed to show that unbiased futures markets are consistent with risk averse suppliers' market power. If, however, information on suppliers' hedging positions is limited, adverse selection may bias futures prices downwards, while if such information is completely unavailable, futures markets will not develop. Exporters with market power will hedge partially when markets are active and information is public, but cannot achieve the full benefits of the optimal insurance contract through futures markets.;An econometric analysis of ten commodity markets makes use of cointegration techniques to determine whether actual futures prices are biased downwards. The analysis provides evidence of downward bias in rubber, cocoa, aluminum, and copper markets, and lends support to the hypothesized relationship between futures market bias and cash market concentration in conditions of imperfect information.;The basic model makes use of a method proposed by Mirrlees for solving moral hazard problems in order to derive the optimal incentive compatible insurance contract for a risk averse monopoly exporter hedging in a market of risk neutral speculators. Non-linearity of this contract precludes a closed form solution to the problem, so numerical solutions are obtained for typical commodity export parameters. Incentive compatible indirect insurance is shown to offer significant benefits over unhedged selling. A restricted cash-in-advance version of the indirect insurance contract is also derived as a way of averting potential sovereign risk problems. Extended to the oligopoly case, the optimal indirect insurance contract offers considerable benefits over the no-hedging equilibrium, although the results depend partially on assumptions about market structure.