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Exchange of goods while investing into production and safety

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  • Kjell Hausken

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Abstract

The tradeoff between production and safety investment is scrutinized for two agents who convert resources into production and safety investment while simultaneously exchanging goods voluntarily. We quantify how two Cobb-Douglas parameters, one scaling production versus safety, and the other scaling the relative importance of two goods, impact two agents’ production, safety effort, incomes, export, import, price, and utilities. An agent’s income from producing a good reaches a maximum for an intermediate value of the Cobb-Douglas parameter that scales the importance of productive effort relative to safety effort. The price of good 2 in terms of good 1, and the agents’ utilities, depend on both the Cobb Douglas parameters, the productivity parameter, and both agents’ resources and unit costs of production and safety effort.

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Bibliographic Info

Article provided by Wroclaw University of Technology, Institute of Organization and Management in its journal Operations Research and Decisions.

Volume (Year): 1 (2013)
Issue (Month): ()
Pages: 29-35

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Handle: RePEc:wut:journl:v:1:y:2013:p:29-35:id:1052

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Keywords: Production; safety; exchange; risk; trade; price.;

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  1. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
  2. Swinbank, Alan, 1993. "The economics of food safety," Food Policy, Elsevier, vol. 18(2), pages 83-94, April.
  3. Anderton, Charles H., 1999. "Appropriation possibilities in a simple exchange economy," Economics Letters, Elsevier, vol. 63(1), pages 77-83, April.
  4. Kotz, Hein & Schafer, Hans-Bernd, 1993. "Economic incentives to accident prevention: An empirical study of the German sugar industry," International Review of Law and Economics, Elsevier, vol. 13(1), pages 19-33, March.
  5. Kjell Hausken, 2004. "Mutual Raiding of Production and the Emergence of Exchange," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 572-586, October.
  6. David J. Feber & Judith M. Feldmeier & Keith J. Crocker, 2003. "The Economic Effects of Road Safety Improvements: An Insurance Claims Analysis," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 70(4), pages 651-664.
  7. Beth Allen, 2000. "The Future of Microeconomic Theory," Journal of Economic Perspectives, American Economic Association, vol. 14(1), pages 143-150, Winter.
  8. Samuel Bowles & Herbert Gintis, 1993. "The Revenge of Homo Economicus: Contested Exchange and the Revival of Political Economy," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 83-102, Winter.
  9. Anderton, Charles H & Anderton, Roxane A & Carter, John R, 1999. "Economic Activity in the Shadow of Conflict," Economic Inquiry, Western Economic Association International, vol. 37(1), pages 166-79, January.
  10. Walter Y. Oi, 1974. "The Economics of Product Safety: A Rejoinder," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 689-695, Autumn.
  11. Thomas, Steve, 1999. "Economic and safety pressures on nuclear power: a comparison of Russia and Ukraine since the break-up of the Soviet Union," Energy Policy, Elsevier, vol. 27(13), pages 745-767, November.
  12. Rose, Nancy L, 1990. "Profitability and Product Quality: Economic Determinants of Airline Safety Performance," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 944-64, October.
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