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A Supply-Response Model Under Invariant Risk Preferences

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Author Info

  • Robert Chambers

    () (University of Maryland)

  • Margarita Genius

    () (Department of Economics, University of Crete, Greece)

  • Vangelis Tzouvelekas

    () (Department of Economics, University of Crete, Greece)

Abstract

In this article we first develop a theoretically consistent supply-response model for producers with invariant preferences facing price risk, and then we empirically apply the model for a group of Cretan olive-oil producers. For doing so, we estimate a Generalized Leontief cost function and we use the price distribution historically faced by individual farmers to induce three di erent representations of price risk corresponding to the second, third and fourth lp norms. These risk measures are combined with the estimated cost-structure to provide three separate representations of the ecient frontier for the representative producer. Empirical results suggest that, regardless of risk measure used, all farmers curtail production in managing price risk.

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Bibliographic Info

Paper provided by University of Crete, Department of Economics in its series Working Papers with number 1209.

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Length: 36 pages
Date of creation: 04 Nov 2012
Date of revision:
Handle: RePEc:crt:wpaper:1209

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Related research

Keywords: price risk; invariant risk preferences; producer responses; Cretan olive-oil producers;

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