Help from hoarders: How storage can dampen perturbations in critical markets

Abstract

Critical resource supply chains are vulnerable to manipulation because of the un-substitutability of their goods. When a monopoly controls all or part of a market, it has the ability to profit from a reduction in supply of a critical resource. We model this complex adaptive system (CAS) using an agent-based model (ABM) and investigate a strategy to mitigate the potential for exploitation of a market by a monopoly. We find that when entities increase their input resource buffer, they decrease the reactivity of resource prices to supply disruptions, which limits the amount by which monopolies benefit from price fixing. This storage strategy also reduces total system losses due to a perturbation.