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The Dynamic Competitive Firm under Spot Price Uncertainty


Author Info

  • Hey, John D


The main result of this paper is that the classic "marginal cost equals price " condition for the output of the perfectly competitive firm in a one-period certain world carries over to a many-period uncertain world if the firm is allowed to hold inventories and if there exists a forward market for the firm's product. This implies the separation of the firm's output decision from its sales decision, and the separation of the firm's output decisions in different periods. Furthermore, output is unaffected by the uncertainty and the firm's attitude to it, though the sales decisions do depend on these factors. Copyright 1987 by Blackwell Publishers Ltd and The Victoria University of Manchester

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Bibliographic Info

Article provided by University of Manchester in its journal The Manchester School of Economic & Social Studies.

Volume (Year): 55 (1987)
Issue (Month): 1 (March)
Pages: 1-12

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Handle: RePEc:bla:manch2:v:55:y:1987:i:1:p:1-12

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Cited by:
  1. Wahl, Jack E. & Broll, Udo, 2009. "G├╝terwirtschaftliches Risikomanagement: Ein Entscheidungsmodell zur Lagerpolitik bei Unsicherheit," Dresden Discussion Paper Series in Economics 14/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  2. Lence, Sergio H. & Sakong, Yong & Hayes, Dermot J., 1994. "Multiperiod Production with Forward and Options Markets," Staff General Research Papers 634, Iowa State University, Department of Economics.


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