Risk Analysis For Proprietors With Limited Liability: A Mean- Variance, Safety- First Synthesis
Since nearly the entire U.S. output of agricultural commodities is produced by proprietors with limited liability, it is important to understand how limited liability affects decision in a risky environment. This article extends the work of Robinson and Barry; Robinson and Lev; and Robinson, Barry, and Burghart. It provides a rigorous derivation of one of their objective functions, compares it to standard risk analysis tools, and suggests several methods of empirical implementation. Under some conditions, utility maximization in the limited liability environment is consistent with optimization of Roy's safety-first criterion, while in other situations Freund's mean-variance criterion is appropriate. However, it is easy to demonstrate cases where neither criterion is applicable.
Volume (Year): 16 (1991)
Issue (Month): 01 (July)
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- Robison, Lindon J. & Barry, Peter J. & Burghardt, William G., 1987. "Borrowing Behavior Under Financial Stress By The Proprietary Firm: A Theoretical Analysis," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(02), December.
- Yassour, Joseph & Zilberman, David D. & Rausser, Gordon C., 1980.
"Optimal choices among alternative technologies with stochastic yield,"
Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series
qt0gt334fc, Department of Agricultural & Resource Economics, UC Berkeley.
- Joseph Yassour & David Zilberman & Gordon C. Rausser, 1981. "Optimal Choices among Alternative Technologies with Stochastic Yield," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 63(4), pages 718-723.
- Yassour, Joseph & Zilberman, David & Rausser, Gordon C, 1980. "Optimal choices among alternative technologies with stochastic yield," CUDARE Working Paper Series 155, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- repec:cdl:agrebk:1141583 is not listed on IDEAS
- Robert Neil Collender & James A. Chalfant, 1986. "An Alternative Approach to Decisions under Uncertainty Using the Empirical Moment-Generating Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(3), pages 727-731.
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