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Uninsurable Risks: Uncertainty in Production, the Value of Information and Price Dispersion

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  • Ana Paula Martins

    (Universidade Católica Portuguesa)

Abstract

This article digresses over the interaction of uncertainty with the firm's optimal decisions in a simple framework: a standard price-taking (short-run restricted) single-input and output unit, subject to the interaction with a zero-mean Bernoulli lottery. The firm is always considered an expected profit-maximizing entity. We inspect the consequences of exogenous uncertainty on the optimal allocations and on its “mean-(and)variance” valuation position. On one hand, we contrast the effect of different sources of uncertainty on the producer's problem – input and output prices and quantities. On the other, we analyse the impact of ex-post flexibility of the decision variables.

Suggested Citation

  • Ana Paula Martins, 2008. "Uninsurable Risks: Uncertainty in Production, the Value of Information and Price Dispersion," Economics Bulletin, AccessEcon, vol. 28(8), pages 1.
    • Handle: RePEc:ebl:ecbull:eb-08aa0014
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    References listed on IDEAS

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    Cited by:

    1. Ana Paula MARTINS, 2016. "Wealth-In-Utility and Time-Consistent Growth: Real Excursions with an “Overlapping” Welfare Function," Turkish Economic Review, KSP Journals, vol. 3(1), pages 54-81, March.
    2. Andrei Matveenko & Vladimir Matveenko, 2014. "Curvature and the Elasticity of Substitution: What Is the Link? Project," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 10(2), pages 7-20.

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    More about this item

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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