Risk aversion and technology portfolios
AbstractThe choice of a portfolio of technologies by risk averse firms is analyzed. Two technologies with random marginal costs are available to produce a homogeneous good. If the risks associated to the technologies are correlated firms might invest in a technology with a negative expected return or conversely might not invest in a technology with a positive expected return. If the technology with the lower expected cost is more risky than the other technology this technology can be driven out of the fi rms' portfolio if risks are highly correlated. With imperfect competition the portfolios of firms are di fferent, and diff erence in risk aversion can explain a full specialization of the industry, the less risk averse fi rms using the low cost technology and the more risk averse fi rms the other one. The framework is used to discuss the issue of investment in electricity markets.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Working Papers with number hal-00763358.
Date of creation: 10 Dec 2012
Date of revision:
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00763358
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
risk aversion; investment; technology mix;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.