The Firm under Uncertainty with General Risk-Averse Preferences: A State-Contingent Approach
AbstractThis paper summarizes and synthesizes recent developments in the state-contingent theory of production under uncertainty presented by Chambers and Quiggin (2000) with a particular focus on the case of generalized expected utility preferences. The problem of the risk-averse firm under price and production uncertainty is analyzed using a state-contingent production technology and general risk-averse preferences. The concept of an efficient frontier, which identifies all potentially optimal production plans for weakly risk-averse decisionmakers, is introduced and used to develop comparative static results. For constant absolute risky technologies, the efficient frontier is shown to correspond to a unique isocost contour. Copyright 2001 by Kluwer Academic Publishers
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Bibliographic InfoArticle provided by Springer in its journal Journal of Risk and Uncertainty.
Volume (Year): 22 (2001)
Issue (Month): 1 (January)
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Web page: http://www.springerlink.com/link.asp?id=100299
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- John Quiggin, 2001. "Production under Uncertainty and Choice under Uncertainty in the Emergence of Generalized Expected Utility Theory," Theory and Decision, Springer, vol. 51(2), pages 125-144, December.
- Walter Briec & Laurent Cavaignac, 2009. "An extension of the multi-output state-contingent production model," Economic Theory, Springer, vol. 39(1), pages 43-64, April.
- Chavas, Jean-Paul & Barham, Bradford, 2007. "On Microeconomic Efficiency and Entrepreneurship under Bounded Rationality," Staff Paper Series 516, University of Wisconsin, Agricultural and Applied Economics.
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