Price Destabilizing Speculation

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Price Destabilizing Speculation

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Title: Price Destabilizing Speculation
Author: Hart, Oliver D.; Kreps, David M.

Note: Order does not necessarily reflect citation order of authors.

Citation: Hart, Oliver D., and David M. Kreps. 1986. Price destabilizing speculation. Journal of Political Economy 94(5): 927-952.
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Abstract: It is sometimes asserted that rational speculative activity must result in more stable prices because speculators buy when prices are low and sell when they are high. This is incorrect. Speculators buy when the chances of price appreciation are high, selling when the chances are low. Speculative activity in an economy in which all agents are rational, have identical priors, and have access to identical information may destabilize prices, under any reasonable definition of destabilization. It takes extremely strong conditions to ensure that speculative activity (of the commodity storage variety) "stabilizes" prices, even in a very weak sense.
Published Version: doi:10.1086/261418
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at
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