The Competitive Firm Under Price Uncertainty: The Role of Information and Hedging
AbstractWe study the impact of transparency in a commodity market on the decision problem of a competitive firm under price uncertainty and hedging opportunities. Market transparency is modeled by means of the informational content of publicly observable signals which are correlated with the random price. We find that the impact of more transparency on labor employment and production depends on the firm's technology. Inparticular, more transparency may result in lower average output even though on average more labor has been used in the production process. We also analyze the link between market transparency and the welfare of the firm. --
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Bibliographic InfoPaper provided by Dresden University of Technology, Faculty of Business and Economics, Department of Economics in its series Dresden Discussion Paper Series in Economics with number 12/07.
Date of creation: 2007
Date of revision:
Transparency; information system; price uncertainty; hedging; competitive firm;
Find related papers by JEL classification:
- L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
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