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| Volume 1,
No. 1,
April
2002 |
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Measuring the Benefits from Futures Markets:
Conceptual Issues
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| Donald
Lien |
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| Department
of Economics, University of Texas at San Antonio, U.S.A. |
| James
Quirk |
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| Emeritus
Professor, California Institute of Technology, U.S.A. |
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| Abstract |
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| This
paper illustrates that the usual consumer surplus approach to
evaluation of the benefits of a futures market fails because of
certain unobserved benefits. In particular, when futures markets
provide benefits in the form of a reduced variability of future
spot prices, the usual consumer surplus approach will
systematically understate the benefits of futures markets. |
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Key
words: futures markets; price variability; consumer surplus
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| JEL
classification:
D6; G0 |
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