Optimal destabilizing speculation or why the optimum tariff may oscillate

This paper uses general equilibrium tools to explore the issue of destabilizing speculation in the context of market power. We show how an individual or a nation may optimally use price destabilization to raise its welfare and show that the nonspeculator does not necessarily suffer. The cases considered are 1) inflection points in the foreign offer curve, 2) an upward sloping foreign excess demand curve which crosses the price axis more than once, 3) a nonconvex foreign social trade indifference curve, and 4) reversed transfers. © 1986 H.E. Stenfert Kroese B.V.

Duke Scholars

Author Edward Tower Economics