Robert G. Chambers () (Dept of Agricultural and Resource Economics, University of Maryland, College Park) John Quiggin () (Department of Economics, University of Queensland)
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This paper presents a dual representation of firm-level and market-level equilibrium behavior for a sole proprietorship economy with competitive and frictionless financial markets and stochastic production opportunities in a two-period setting. The dual equilibrium model is used to state conditions for the firms' production choices to be independent of their risk preferences in equilibrium. These conditions entail Pareto optimality, but do not require either that the firm's consumption choices lie within the span of financial markets or the assumption of an extreme version of linear risk tolerance.
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Paper provided by Risk and Sustainable Management Group, University of Queensland in its series Risk & Uncertainty Working Papers with number
WPR03_6.
Find related papers by JEL classification: D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty