American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Strategic Limit Orders and Intertemporal Price Dispersion
American Economic Journal: Microeconomics
(pp. 499–533)
Abstract
We 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.Citation
Banerjee, Suman, Ravi Jagannathan, and Kai Wang. 2026. "Strategic Limit Orders and Intertemporal Price Dispersion." American Economic Journal: Microeconomics 18 (4): 499–533. DOI: 10.1257/mic.20240147Additional Materials
JEL Classification
- D43 Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection
- G12 Asset Pricing; Trading Volume; Bond Interest Rates
- G14 Information and Market Efficiency; Event Studies; Insider Trading
- G41 Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets [Neurofinance]
- Q02 Commodity Markets