Optimal Risk Management, Risk Aversion, And Production Function Properties
For production risk with identified physical causes, the nature of risk, production characteristics, risk preference, and prices determine optimal input use. Here, a two-way classification for pairs of inputs Â– each input as being risk increasing or decreasing and pairs as being risk substitutes or complements Â– provides sufficient conditions to determine how risk aversion should affect input use. Unlike the Sandmo price risk averse firm may produce more expected output and use more inputs than a risk neutral firm. Sufficient conditions to determine types for pairs of inputs are also related to properties of the production function.
Volume (Year): 17 (1992)
Issue (Month): 02 (December)
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- Anderson, Jock R. & Feder, Gershon, 2007. "Agricultural Extension," Handbook of Agricultural Economics, Elsevier.
- Babcock, Bruce A. & Chalfant, James A. & Collender, Robert N., 1987.
"Simultaneous Input Demands And Land Allocation In Agricultural Production Under Certainty,"
Western Journal of Agricultural Economics,
Western Agricultural Economics Association, vol. 12(02), December.
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- Ian Jewitt, 1987. "Risk Aversion and the Choice Between Risky Prospects: The Preservation of Comparative Statics Results," Review of Economic Studies, Oxford University Press, vol. 54(1), pages 73-85.
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- Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
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