Mohapatra, Pratap with Kailas C. Sahu and Madhab C. Bora,"A System Dynamic Study of Commodity Price Stabilization by Buffer Stock and its Effect on Industry Performance: A Case of Indian Tea", 1984
Using System Dynamics as the primary tool of investigation, an attempt has been made in this paper to present (i) a general model of commodity price fluctuation, (ii) a price stabilization policy based on buffer stock, and (iii) the impact of this policy on the long term growth of the commodity industry. The model has been tested for the case of Indian Tea.Average unit cost of the commodity at the point of sale, operating profit margin desired by the sellers (computed on the basis of average quality of supply), actual inventory, and the average sales rate are considered as the chief determinants of the commodity price. Circular relationships among these variables have been considered to generate the price fluctuation over time. While testing the price stabilization policy, the model considers its operation phase. It is shown in this paper that such a price stabilization policy tremendously boosts the overall long term growth of the industry.
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