Equilibrium in production and futures markets
This paper develops a general equilibrium analysis of production and futures markets with free entry/exit. It does so by analyzing partial equilibria with a reference utility level and entry/exit, first in a product market and then in a futures market. The markets are then considered jointly. Comparative statics results arise due to a mismatch between the source of disequilibrium and the compensation mechanism which restores reference utility. Risk aversion is a sufficient structure on preferences to determine most of the results. However, the well-known separation result is modified somewhat in the two-market model. Author Keywords: General equilibrium; Optimal hedge ratio; Separation
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- Chavas, Jean-Paul & Pope, Rulon D & Leathers, Howard, 1988. "Competitive Industry Equilibrium under Uncertainty and Free Entry," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 331-344, April.
- Appelbaum, Elie & Katz, Eliakim, 1986. "Measures of Risk Aversion and Comparative Statics of Industry Equilibrium," American Economic Review, American Economic Association, vol. 76(3), pages 524-529, June.
- Davis, George K, 1989. "Income and Substitution Effects for Mean-Preserving Spreads," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(1), pages 131-136, February.
- Ormiston, Michael B & Schlee, Edward E, 1994. "Wage Uncertainty and Competitive Equilibrium in Labour Markets," Economica, London School of Economics and Political Science, vol. 61(242), pages 137-145, May.
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