Uninsurable Risks: Uncertainty in Production, the Value of Information and Price Dispersion
AbstractThis 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.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 28 (2008)
Issue (Month): 8 ()
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Other versions of this item:
- Ana Paula Martins, 2007. "Uninsurable Risks: Uncertainty in Production, the Value of Information and Price Dispersion," Annals of Economics and Finance, Society for AEF, vol. 8(2), pages 341-383, November.
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- J2 - Labor and Demographic Economics - - Demand and Supply of Labor
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