DOI: 10.1257/mic.20240147 ISSN: 1945-7669
Strategic Limit Orders and Intertemporal Price Dispersion
Suman Banerjee, Ravi Jagannathan, Kai WangWe study a two-period commodity market with competitive consumers and Cournot sellers. Without speculation, equilibrium is stationary. A storage-capable, strategically large speculator can profitably create deterministic intertemporal price dispersion using standard order types. A period-1 limit buy order flattens residual demand, induces higher output, and yields a low purchase price. With mandatory liquidation, resale remains below the no-speculation price but above the purchase price, so the speculator profits; consumers gain and sellers lose. With free disposal and a stop-loss, the period-2 price can exceed the benchmark, benefiting sellers but harming consumers. (JEL D43, G12, G14, G41, Q02)