International Journal of Business and Economics Volume 1, No. 1 April​, 2002

Measuring the Benefits from Futures Markets: Conceptual Issues

Donald Lien

Department of Economics, University of Texas at San Antonio, U.S.A.

James Quirk

Emeritus Professor, California Institute of Technology, U.S.A.

Abstract

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.

Keywords：futures markets, price variability, consumer surplus.

JEL Classifications：D6, G0.

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